Taking councel: New rules on electricity trading adopted in order to create an effective electricity trading market

  • 2010-01-13
  • By Darius Miniotas [Jurevicius, Bartkus & Partners]

On December 9, 2009, the Minister of Energy of the Republic of Lithuania approved the rules on electricity trading (“the Rules”) which came into effect on January 1, 2010. The Rules were adopted in order to create a legal basis for an effective electricity trading market, which began to function after the shutdown of the Ignalina Nuclear Power Plant on December 31, 2009.

Since 1984 the Lithuanian electricity production market was dominated by the largest electricity producer in the Baltic States – the 3,000 MW Ignalina Nuclear Power Plant. Therefore effective and undistorted competition was impossible and the liberalization of the electricity market in 2002 was more a formal step than an actual achievement.
However, from January 1, 2010, the situation changes radically as the Ignalina Nuclear Power Plant ceases its activities pursuant to the conditions undertaken by Lithuania upon joining the European Union in 2004. Shutdown of the natural monopolist of the production of electricity, and adoption of the Rules provides an opportunity to create an effective competition environment in electricity trading market and the possibility for the free trade of electricity with other members of the European Union.

The Rules establish that the electricity trading market shall be based on the principles of fair competition, reliability, fairness, equality of market participants and transparency of market information. Consumers shall be provided with a real opportunity to choose an electricity supplier in order to ensure a constant supply of electricity. Electricity suppliers on their behalf shall have the opportunity to participate in trading of electricity without any restraints.

The Rules provide that trading of electricity shall be possible in the following ways:
1)    trading of electricity under bilateral contracts between the producers and suppliers;
2)    trading of electricity in the exchange;
3)    trading of the regulating energy in the auction organized by the transmission system operator;
4)    trading of the regulating energy by using the emergency reserve power pursuant to the contracts of systemic services, concluded between the transmission system operators and (or) between the transmission system operator and producers;
5)    trading of the balancing energy between the transmission system operator and suppliers of balancing energy.

The adopted Rules are the result of implementation of the National Energy Strategy approved by the Decree No X-1046 of the Seimas of the Republic of Lithuania, dated January 18, 2007, as well as the common declaration announced by the prime ministers of Lithuania, Estonia and Latvia on April 27, 2009, and provide a step forward in creating a common electricity market of all Baltic states based on the principles and experience of the electricity market of Northern countries (“Nord Pool”).

Darius Miniotas is an associate advocate at Jurevicius, Bartkus & Partners, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Glikman & Partnerid in Estonia and Kronbergs & Cukste in Latvia, dedicated to providing a quality “one-stop shop” approach to clients’ needs in the Baltics.