On
17th April 2013, the EU adopted Regulation No 347/2013 on guidelines
for “TEN-E Regulation”. The TEN-E Regulation has been supplemented with new financial
instruments facilitating access to long term financing of eligible PCI by
providing debt facilities into projects. Then, on 14th October 2013,
the EC adopted a list of 248 key energy infrastructure projects, including also
third countries’ projects, among others such involving Energy Community
Contracting Parties (Albania, Bosnia and Herzegovina, Montenegro, Serbia and
Ukraine).

In
the same direction, on 6th October 2011, the EnC Ministerial Council
approved the establishment of a Strategy TF mandated to “elaborate a Regional Energy Strategy, including a special part on
Regional Power Development and Investment Plan aiming at promoting investments.

In the conclusions of its 33rd meeting of 18th June 2014,
the PHLG requested full incorporation of Regulation 347/2013 into the Energy
Community acquis at the Ministerial Council meeting in 2015.

As reported by the ACECR along the second week of
august 2015, the 13th
Ministerial Council Meeting on 16 October 2015, that will take place in Tirana,
Albania, have announced the following with the Decision D/2015/02/MC-EnC on the implementation of Regulation 347/2013.
Notwithstanding, in its Risk Related Regulatory
Investment Incentives for Projects of Energy Community Interest, Recommendation
Paper, from the April 2015, ECRB has consider necessary the elaborate of the
certain aspects of the regulatory treatment of PECI.

In
specific, ECRB notes that several
issues remain to be resolved by the EnC institutions in order to
establish a sustainable regional mechanism supporting infrastructure
investments in the region. The dynamics
of adjustment of the PECI list in synthesis state: currently it is not clear if
and when the PECI list will be reviewed when in EU the PCI list is renewed in
intervals of two years. Treatment
of the electricity generation projects in the second PECI list. Treatment of
CBA. Identifying applicable debt
and equity financing sources/mechanisms for PECI.

Then at its
meeting of 15th April 2014, the ECRB decided to develop a toolbox on
regulatory investment incentives to be used by the NRA depending on national
specificities and a common methodology for project risk evaluation. In regard,
it was followed with a rapid presentation of the national practices of risk
evaluation in the EnC CP and then with the recommendation on a common
methodology for risk identification. For concluding with a status review of
applicable investment incentives in the CP, highlighting the critical barriers
for introducing investment incentives and presents a toolbox which may be used
by NRAs to define applicable investment incentives.

As wide
accept the general “financial climate” for energy networks infrastructure
projects, is significantly influenced by the applicable regulatory framework.
Being subject of price regulation, electricity and natural gas transmission
companies reimburse their capital and operational expenditures based on pricing
mechanisms (price controls) developed by the NRA. Normally, well-designed price
controls should ensure recovery of all prudently incurred costs, including
investment projects costs, taking into consideration at least the average systematic risk of the TSO’s
investment portfolio via the regulator’s estimate of the cost of
capital, but also other risks depending
on the features of the applied model of price regulation.

The ECRB
recognizes that the PECI promoters may be exposed to additional
non-controllable risks that were not observed or accounted for by the NRA while
setting the price controls, and that such risks may adversely influence both
the project promoter’s decision to invest and the lenders perception of the
bankability of the project. Then the ECRB proposes the following approach to
risk identification and assessment to the Contracting Parties NRAs.

First, using
a transitional methodology for TSO’s portfolio risk identification and
assessment until implementation of the TEN-E Regulation in the Energy Community
law, which follows the ACER methodology
to the extent possible. In more using the ACER risk evaluation
methodology developed by ACER in line with Article 13.5 of the TEN-E Regulation
once the TEN-E Regulation is implemented by the Energy Community Contracting
Parties.

In regard
the Transitional methodology for risk
identification and assessment ECRB considers that the process of
identification and assessment of TSOs project portfolio should include the
following steps: Availability of information on project portfolio risks;
Identification of the nature of risks from a regulatory point of view; Risk
mitigation measures by TSOs; Assessment of systematic risk and definition of
cost of capital; Risk mitigation measures already applied by NRAs.

Regard a summary of national practices regarding risk mitigation,
regulatory measures and monetary reward or penalty schemes, in the
analysed markets, the rate-of-return, price cap and revenue cap regulation are
implemented. Rate-of-return regulation is normally performed on yearly basis,
while in the case of incentive based regulation the revenues or prices are
capped for different periods, namely three or five years.

In
specific on the electricity investment, are applied the following regulatory
systems: Rate-of-return regulation in four jurisdictions (Bosnia and
Herzegovina, Croatia, Serbia, Ukraine); Revenue cap in four jurisdictions (FYR
of Macedonia, Kosovo*, Moldova, Montenegro); Price cap in one jurisdiction
(Albania). And in natural gas, are applied the following regulatory systems:
Rate-of-return regulation in four jurisdictions (Bosnia and Herzegovina,
Georgia, Serbia and Ukraine); Revenue cap in three jurisdictions (Croatia, FYR
of Macedonia, Moldova).

The here
communication came within the framework of the preparation of the analytic
report, about Energy Market and Investments Opportunities in Albania and the
WBs, to be release in the shortly upcoming period by ACERC. In cases of
interest to the directly cooperation as author with analyses or for any kind of
involvement or support as well as a partner, contact us at the
info@albaniaenergy.org. For more keep update with the EU & WBs / Albania Energy
Investments Updates

or visit the Official Page of ACERC.