NATURAL GAS TARIFF STRUCTURES IN THE ERRA MEMBER COUNTRIES Country: Republic of Macedonia

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

NATURAL GAS MARKET IN REPUBLIC OF MACEDONIA

Natural gas market in Republic of Macedonia is in very beginning phase of its develop Regulated by the Energy Law (primary regulation) The Energy Regulatory Commission prepares and issues by law (secondary regulation), and has the responsibility regarding economic regulation of the energy sector 1 (one) licensed company for supplying natural gas on tariff consumers which are connected to the transmission system. (AD Makpetrol) 1 (one) licensed company for transmission and for transmission system operator for natural gas on tariff consumers which are connected to the transmission system (AD GA-MA) 1 (one) licensed company for distribution of natural gas Kumanovo, for tariff consumers which are connected to the distribution system. (is still in construction) 5 (five) licensed companies for trading natural gas, but only one is active . About 30 industrial consumers and district heating company are directly connected to the transmission system Up to now, only one customer (district heating company) requested and obtained status of eligible customer

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

NATURAL GAS MARKET IN REPUBLIC OF MACEDONIA

Current transmission pipeline is 165km long, with nominal capacity of 800 million m3, working pressure 54 bars Current consumption of natural gas is about 15% of its capacity or 120 million m3, user is the industry Insignificant consumption of natural gas / no distribution network / natural gas is not used by the households Development of the distribution of natural gas is on the very beginning phase, in construction phase.. Energy Regulatory Commission during 2008 issued first license for distribution (Kumanovo) and in march 2009 were issued license for natural gas distribution, for operation of the natural gas distribution system and for supplier of tariff customers, connected on the distribution system for Free technological industrial development zone in Skopje formed by Government of the Republic of Macedonia

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

REPUBLIC OF MACEDONIA GAS PIPELINE

S OP O

High pressure pipeline- realized High pressure pipeline- priority for construction Transmission pipeline - planed

DEVELOPMENT PLAN

T MK

BL E AC KD M

SRBIJA AND MONTENEGRO

DEVE BAIR MKD

BULGARIJA

SKOPJE

VELES

DEBAR MKD

KICEVO NEGOTINO
STRUMICA MKD

ALBANIA

OHRID
MEGITLIJA MKD

BITOLA

GREECE

GEVGELIJA MKD

STRUGA MKD

STRUMICA -Extending of magisterial pipe line towards to Negotino, Bitola -Construction of distribution pipe lines in Skopje, Kumanovo and Kr. Palanka -Construction of CCHP in Skopje (180 MW)

1.

THE ROLE OF REGULATOR IN THE SPHERE OF REGULATION OF THE NATURAL GAS SUPPLY SYSTEM
The ERC brings regulations on price formation of the natural gas supply system. The ERC prescribes tariff systems for natural gas and adopts decisions on prices of the natural gas in compliance with the price setting methodologies and tariff systems for natural gas The ERC monitors the energy market operations and mechanisms used to deal with congested capacity on the natural gas pipelines within the Republic of Macedonia

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

2. REGULATORY APPROACH, FOLLOWED IN YOUR COUNTRY

Energy Regulatory Commission of the Republic of Macedonia use the methodology based on incentive price regulation, which is applied by the price cap method The price cap method establish a price adjusted to cost fluctuations, ensuring sufficient revenue to cover justified (normalized) expenses
ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

3. DO YOU HAVE NATURAL GAS STORAGES? IF YES, HOW DO YOU COMPENSATE THE OPERATING AND MAINTENANCE EXPENSES?

In Republic of Macedonia there are no storage for natural gas

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

4. ACTIONS FORESEEN TO PROTECT THE VULNERABLE CONSUMERS (PLEASE KINDLY EXPLAIN)

Till now, there are no households connected to the distribution network. Also, there is no regulation for energy poverty in the natural gas sector. Government of the Republic of Macedonia and Ministry for labor and social policy are responsible to regulate and to take measures in place to address affordability constraints and the needs of vulnerable populations

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

5. WHICH METHOD IS USED FOR CALCULATION OF THE ANNUAL DEPRECIATION OF THE MAIN ASSETS?
According to the Rulebook on the method and conditions for regulating the prices for transmission, distribution and supply of natural gas the depreciation of the regulated assets is calculated according to minimum rates regulated by low, and this is the same method used in the statutory accounts

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

6. WHAT IS THE DEPRECIATION RATIO (%) OF THE MAIN ASSETS?

BUILDINGS, INSTALLATIONS PIPELINES EQUIPMENT TRANSPORTATION MEANS OFFICE EQUIPMENT AND OFFICE FURNITURE IT EQUIPMENT - 2,5 % - 2,5 % - 5,0 % - 10,0 % - 20,0 % - 25 ,0 %

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

7. WHETHER THE CAPITAL INVESTMENTS ARE TO BE AGREED WITH THE REGULATOR? HOW THEY ARE ACCOUNTED DURING TARIFF CALCULATION?
PARTIALLY INCLUDED IN THE TARIFF UPON THEIR FULFILLMENT

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

8. TARIFF CATEGORIES (TYPES OF SERVICES)

IN THE NATURAL GAS SUPPLY SYSTEM
Tariffs that are regulated: transportation, distribution and supply with natural gas to tariff customers directly connected to the transportation system ERC determine: price for transportation and services of the system operator price for supplying the tariff consumers which are connected on the system for transport of natural gas selling price for tariff consumers connected on the system for transport of natural gas ( consist of import price and tax for import, price for transport and services of the natural gas system operator and price for supplying the tariff consumers connected on system for transport of natural gas) price for distribution and for the services of the operator of the natural gas system for distribution of natural gas price for supplying the tariff consumers connected on system for distribution of natural gas
ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

2008 Approved quarterly natural gas sale prices for captive

consumers connected to the transmission grid
Dimension nm3 USD/1000 nm3 USD$/ . MKD/nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 I quarter
51.527.787 364,14 42,7729 15,5753 0,3688 8,6223 0,1777 4,1545 2,2170 51,8319 18,3388 428,7487 3,3010 77,1748 21,6398 505,9234

Elements
1 2 3 4 5

II quarter
17.639.877 410,11 40,1898 16,4822 0,3466 8,6241 0,1777 4,4215 2,2170 55,1633 19,2235 478,3188 3,4602 86,0974 22,6838 564,4162

III quarter
15.620.231 479,06 40,0148 19,1695 0,4304 10,7560 0,1777 4,4409 2,2170 55,4045 21,9946 549,6614 3,9590 98,9390 25,9536 648,6004

IV quarter
35.724.273 532,03 43,2105 22,9893 0,4940 11,4324 1414 4,1124 2,2170 51,3070 25,8780 598,8818 4,6580 107,7987 30,5360 706,6805

Quantity of GAS imported Import price in foreign currency Exchange rate Import price in national currency Subordinate (Dependant) costs Subordinate (Dependant) costs

Price for supply and trade Price for supply and trade

Price for transport and system operator Price for transport and system operator Pre VAT price Pre VAT price VAT ( 8 * 18% ) VAT ( 8 * 18% ) SALE PRICE ( 8+9) SALE PRICE ( 18+9)

10

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia

2009 Approved quarterly natural gas sale prices for captive consumers connected to the transmission grid
Elements
1 2 3 4 5

Dimension nm3 USD/1000 USD$/ . MKD/nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 MKD/nm3 USD/1000 nm3 nm3

I quarter
20.000.000 471,23 46,33910 21,8364 0,4974 10,7339 0,1777 3,8348 2,2170 47,8430 24,7285 533,6417 4,4511 96,0555 29,1796 629,6972

II quarter
20.000.000 358,60 47,9839 17,2070 0,4148 8,6446 0,1777 3,7033 2,2170 46,2030 20,0165 417,1509 3,6030 75,0872 23,6195 492,2380

III quarter
20.000.000 262,76 44,4848 11,6888 0,3003 6,7506 0,1777 3,9946 2,2170 49,8372 14,3838 323,3425 2,5891 58,2016 16,9729 381,5441

Quantity of GAS imported Import price in foreign currency Exchange rate Import price in national currency Subordinate (Dependant) costs Subordinate (Dependant) costs Price for supply and trade Price for supply and trade

Price for transport and system operator Price for transport and system operator

Pre VAT price Pre VAT price

VAT ( 8 * 18% ) VAT ( 8 * 18% )

10

SALE PRICE ( 8+9) SALE PRICE ( 8+9)

ERRA Tariff/Pricing Committee meeting September 24-25, Riga, Latvia