As requested by Mark.
---------------------- Forwarded by Philip Davies/LON/ECT on 27/07/2000 14:05 
---------------------------


Philip Davies
25/07/2000 17:49
To: Poland
cc:  

Subject: URE Statement on Criteria for Lifting Tariff Approval Requirements

The President of the Regulatory Authority has recently issued a 3-page 
statement, outlining the criteria he will take into account in assessing 
whether to release companies (ie, generators and trading companies) from the 
tariff approval requirements in the Polish Energy Law.  We may arrive at a 
situation later this year where we have signed the necessary transmission, 
balancing and settlement contract(s) with PSE so that we can do wholesale 
trades -but are still subject to the requirement to get our trades (sales, 
not purchases) "approved" by URE before we can conclude them.  

The URE statement and recent press comments by the regulator do not give us 
any grounds to believe that traders such as Enron are going to be released 
soon from this requirement (in the press he has talked about possibly 
releasing some generators from the requirement in early 2001).  We may 
therefore need to investigate getting an "approved tariff".  However, unless 
we can get a framework agreement in place (so we don't need to get each and 
every transaction separately approved), this does not appear to be a workable 
solution.

The attached statement is unhelpful in that it appears to be simply a list of 
every conceivable reason that URE could want to use at some point to justify 
continuing with the current restrictions.  While some (but far from all) of 
the issues raised are genuine concerns, it does not of course follow that 
requiring tariffs to be approved for all generators and traders is the right 
response.  (In October 1999 we presented to URE the reasons why we believe 
that these requirements make no sense for a new entrant supplier such as 
Enron.)  

However, since this issue is unlikely to go away, Jarek D. and I plan to use 
this statement to develop a dialogue with URE and see if we can find a 
workable way forward.

Regards,
Philip



URE definition of  "competitive market" which must exist before he can 
consider lifiting the requirements:

"The Authority,s President defines the competitive market as a market where 
the transaction price is determined as a result of free interplay between 
supply and demand, and the customer has the right to choose the supplier 
without restraint, and to change it without excessive costs to himself, as 
well as being able to decide the quantity of purchases. Each of the subjects 
on the competitive market functions within similar external conditions. The 
transactions concluded on this market are subject to civil and legal 
regulations, or customary ones, and the information regarding the prices of 
goods on offer are generally accessible. The President of the URE estimates 
that as far as electric power is concerned, a supplier,s market rather than a 
competitive market is still in operation, because the customers are not able 
to exert economic pressure where their preferences are taken into account."