1 An Overview Of iCer’s seCurity

Of supply repOrt

LOGO

THE NATIONAL, REGIONAL AND GLOBAL DIMENSIONS rOle Of enerGy reGulAtOrs in GuArAnteeinG reliABility AnD seCurity Of supply

ICER’s rationale for its review of international case studies

The report by the International Confedera-

tion of Energy Regulators (ICER) on the

“Role of Energy Regulators in Guaran-

teeing Reliability and Security of Supply

- National, Regional and Global Dimensions” deals

with the role of energy regulation in addressing se-

curity of supply issues with a particular focus on the

promotion of investments.

Energy infrastruc-ture development

on a regional scale can offer substantial cost

reductions

The ICER Security of Supply Re-port is the outcome of a 3-year project carried out with the par-ticipation of worldwide regional and national regulatory authori-ties (NRAs) within the framework of ICER activities. The ICER Security of Supply Re-port also reflects input obtained through extensive contact and interaction established by ICER with some of the world’s most influential insti-tutions involved in the energy sector: EBRD, Energy Char-ter, IDB, IEA, UNECE, VLP-GO and the World Bank. The Report highlights the diverse energy re-source endowments, en-ergy supply policies and regula-tory framework of the countries covered by the regional regula-tory authorities which contrib-uted to the report. The report examines the risks for the security of energy sup-

plies and the interplay between energy regulation and infra-structure investments to reduce these risks on a regional and world wide scale.

Role of energy regulators in security of supply

Although many regulators are not formally responsible for se-

curity of supply (SoS), reg-ulatory decisions can

impact significantly on energy secu-rity. Tariffs for energy trans-port, storage and distribution feed directly into the resourc-

es available for investment by the

system operators and therefore in the tariffs paid

for the use of infrastructure. The ability of consumers to pay for their energy needs depends on prices, which are in turn affected by the operation of wholesale markets, over which regulators have at least a monitoring role.

The most important message learned at all stages of develop-ment of regional energy infra-

structure projects is the need to accompany capacity expansion

and cross-border trade with ade-quate forms of sector restructur-ing, institutional and regulatory

reform.The reliability and quality of supply depend substantially on regulatory decisions regard-ing standards, rewards and penalties. Overall, regulatory decisions impact directly or indirectly industry performance and sec-tor outcomes in terms of output and con-sumption levels, productivity and efficiency, continuity and quality of supply, financial performance, capacity levels and reserve margins, costs and prices, competition, af-fordability of supply and impacts on eco-nomic development.

Good regulatory decisions ultimately:

- Ensure that investors have the necessary resources for maintenance and investment expenditures, including a reasonable rate of return;- Help establish and maintain sustainable commercial operations and provide an effi-cient industry with good cost performance;- Protect consumers (current, potential and future) by facilitating the production and dis-tribution of energy at accessible prices;- Achieve government policy objectives such as connection targets, fuel diversity goals and efficiency targets;- Provide governments with perceptions and motivations for rational energy sector poli-cies (for example, in relation to rural electri-fication and subsidisation).

Main Conclusions

• Energy sector reform is needed to enhance mar-ket efficiency: indispensable to attract private invest-ments• Regulatory independence is a key prerequisite to enable market reform• Harmonisation of rules on a regional scale must be achieved to facilitate cross-border projects• Cross-border coordination between regulatory bodies should be established to achieve effective regulation of projects with a regional scope• Best practice exchange is essential, particularly in the development of cross-border projects

Regulators can play an important role in con-tributing to the achievement of SoS in coun-tries where regulatory systems work well and where governments allow them to operate effectively, also by identifying problems and making adequate proposals for their solution.Regulatory associations can contribute signifi-cantly to the achievement of SoS, by aiming at attaining greater compatibility in the regula-tion of energy in their member countries.

Recommendations

FOR GOVERNMENTS

• To clearly separate generation/transmission/distribution/supply functions• To provide guarantees on project development• To simplify and speed up authorisation proce-dures• To recognise the role of energy regulation as distinct from government energy and social pol-icy• To endow regulators with stable responsibili-ties and an appropriate level of independence and autonomy

FOR REGULATORS

• To clearly recognise the impact of their deci-sions on energy security• To ensure that their decisions promote invest-ments in infrastructure• To work towards the harmonisation of rules with those of neighbouring countries• To improve monitoring of quality of supply and reliability standards• To support domestic energy resource develop-ment and end-use efficiency

International Confederation of Energy Regulators (ICER) The International Confederation of Energy Regulators (ICER) was created at the Fourth World Forum on Energy Regulation (WFER), in 2009. It is a voluntary framework for the co-operation of energy regulators from around the globe. Its aim is to improve public and policy maker awareness and understanding of energy regulation, and to play a role in ad-dressing a wide spectrum of socio-economic, environmental and market issues. Through ICER, energy regulatory issues tran-scending regional and national boundaries can be addressed through dialogue and co-operation on a global scale. ICER’s member-ship includes over 200 regulatory authorities over six continents.

The virtual work of ICER

ICER is a virtual organisation, the backbone of which is

its website (www.icer-regulators.net) and its four virtual

working groups (VWGs):

VWG1: Opening & Integration of Regional MarketsVWG2: Technology ChangeVWG3: Consumers IssuesVWG4: Education, Training & Best Practices

Publications

The cOnTenT Of This LeafLeT dOes nOT necessariLy refLecT The OpiniOn Of The individuaL members Of icer.

The full report, as well as all others listed here, can be found at

http://bit.ly/ICERreports

phOTOs: sTOckfresh.cOm

ICER Reports:

• Examples of Methodologies Utilized to Manage Competitiveness and Af-fordability Issues related to the Introduction of Renewable Forms of Electric-ity Generation and New Technologies: An Overview Report of a Compilation

of Four Case Studies, April 2012, Ref. I12-C&A-11-04

• Experiences on the Regulatory Approaches to the Implementation of Smart Meters, April 2012, Ref. I12-C&A-08-01• Role of Energy Regulators in Guaranteeing Reliability and Security of Supply - National, Regional and Global Dimensions, March 2012, Ref. I12-SoS-08-03• Renewable Energy and Distributed Generation: International Case Studies on Technical and Economic Considerations, February 2012, Ref. I12-CC-17-03• ICER Response to the European Commission Public Consultation on the Ex-ternal Dimension of the EU Energy Policy, Ref. I11-SC-05-05, 21 February 2011• ICER Energy Efficiency Report, Ref. I10-SC-02-04, June 2010• ICER Work Plan 2010-2012• ICER 2010 Annual Report• World Energy Regulators’ Statement on Climate Change, 20 October 2009

ICER Factsheets:

• ICER’s Renewables and New Technologies Report, Ref. FS-12-04, August 2012• ICER’s Security of Supply Report, Ref. FS-12-01, May 2012• ICER’s Renewable Energy and Distributed Generation Report, Ref. FS-12-02, May 2012• ICER’s Smart Metering Report, Ref. FS-12-03, May 2012• Brochure on the International Confederation of Energy Regulators (ICER), Ref. FS-12-05, May 2012• Regulatory Practices for the Promotion of Energy Efficiency, Ref. FS-11-01, April 2011

www.icer-regulators.net

office@icer-regulators.net

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With the suppoRt oF the euRopean commission. this publication ReFlects the vieWs only oF the authoR(s), and the commission cannot be held Responsible FoR any use Which may be made oF the inFoRmation contained theRein.

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