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POSITION PAPER OF THE REPUBLIC OF LATVIA
Chapter 14: "ENERGY"

Setting the time frame for the process of adoption and implementation of the European Union's acquis communautaire, the Latvian Government adopted 1 January 2003 as the data on which Latvia will be prepared for accession to the European Union.

Latvia accepts in full the acquis communautaire (including the Euratom Treaty) in the area of "Energy", and will implement it before 1 January 2003. However, for the requirements of Directive 68/414/EEC as amended by Directive 98/93/EC, and Directive 73/238/EEC, regarding the  formation and maintenance of oil product stocks equal to 90 days consumption, Latvia asks  for a transition period until 31 December 2010.  

Where it is possible, Latvia is ready to adopt and fully implement Community legislation before 1 January 2003 . Certain provisions of acquis communautaire applicable exclusively to the Member states will be fully implemented as from the date of accession.

The Overall Energy Policy

The Cabinet of Ministers adopted the State Policy in Energy Sector on 30 November 1999. It envisages the action plan for the wide range of measures to be taken in order to facilitate the creation of the competitive energy sector of the Baltic States in liberalised, open energy market and in full conformity with the EU rules for the market liberalisation and the promotion of competition.

A draft National Energy Efficiency Strategy is being prepared for submission to the Cabinet of Ministers. The Strategy provides for drafting and implementation of legislative documents related to energy efficiency in accordance with the EU Directives. 

Energy Policy and International Obligations

The energy policy of the Republic of Latvia includes principles that are based on guidelines and development priorities set by the EU energy policy. The Energy Law was passed in 1998. Its basic principles comply with acquis requirements for the market liberalisation, energy efficiency, and supply security.

The Republic of Latvia has signed and undertaken to observe the European Energy Charter Treaty and Energy Efficiency Protocol.

The Republic of Latvia has signed the Kyoto Protocol.  In accordance with its provisions, measures for environmental protection by reduction of CO2 emissions are undertaken .

The Republic of Latvia is a member of the World Trade Organisation since February 1999.

The Republic of Latvia participates in EU programs for the countries of Eastern Europe, including PHARE and Synergy. By applying for participation in EU SAVE programme the Republic of Latvia has shown its determination to take part in international initiatives aimed at energy efficiency improvement.

The Republic of Latvia actively participates in some international projects and programs: Baltic Ring, Baltic Gas Grid and Baltic Energy Task Force, as well as Northern Dimension. The Republic of Latvia will also be an eligible partner in practical implementation of such projects in the future.

Security of Supply and Oil Stocks

The Republic of Latvia has already partly harmonised its national legislation with the requirements of Directive 68/414, amended by Directive 98/93, as well as Directive 73/238, on formation of oil and oil product stocks and crisis management and submission of information; and it will complete it by 15 December 2002.

The Republic of Latvia is asking for transitional period until 31 December 2010 for the complete implementation of provisions of Directive 68/414, amended by Directive 98/93, as well as Directive 73/238, on the issue of formation of oil and oil product stocks equal to 90 days consumption.

A transitional period is necessary in order to collect gradually the financial resources needed for formation and maintenance of oil product stocks. The total financing for the formation of stocks is estimated to amount to 176,7 million EUR (106 million Ls), including for fuel (heavy oil) stocks âÀ“ 29,8 million EUR (17,9 million Ls). The maximum annual costs after the formation of the stocks are 12,6 million EUR (7,6 million Ls), including for fuel (heavy oil) stocks âÀ“ 1,3 million EUR (0,8 million Ls).

Daily consumption of oil products does not exceed 2000 t in Latvia.

The expected schedule for the formation of oil product stocks: 

The following tasks have been completed. They implied an approximation of the Latvian legislation  with the requirements of Directive 68/414, amended by Directive 98/93, as well as Directive 73/238:

• The Energy Law chapter  XI names the measures needed for energy crisis. There  have been issued Cabinet of Ministers' Regulations that regulate energy and gas supply security measures during energy crisis in accordance with the requirements of Directives 96/92 and 98/30;

• The Law on State Material Stocks  states the general rules for establishment, storage and utilisation of strategic stocks. The law has been supplemented by  Cabinet of Ministers' Regulations;

• The Civil Defence Law  regulates activities during crisis;

• On 22 February 2000, the Cabinet of Ministers approved the Conception of Oil Product Stock Formation, based on which a package of Cabinet of Ministers regulations will be drafted. They will implement the requirements of Directive 68/414, amended by Directive 98/93, as well as Directives 73/238 and 76/491 and Decisions 77/190, 77/706, 79/639, and 81/883.

The Republic of Latvia recognises that during the time, in which the oil stocks will be created, particularly during the first few years there can arise problems in transport sector due to absence of oil products. It will not affect the industrial, the household, or the electricity generation sectors where it is possible to use natural gas as alternative.

Competitiveness and Creation of Internal Market

The Republic of Latvia is ready to approximate and implement EU law concerning transit, Trans-European energy networks and other relevant documents on the date of accession. This includes notably the Directives 90/547 and 91/226 on the transit of electricity and natural gas.

At present, the transit of electric energy, gas and oil products is a major economic activity in Latvia. In future, the process will be improved by providing the transparency of service prices and tariffs according to the Protocols of the European Energy Charter Treaty.

All the costs of the technology cycle are included in the electricity sales price already now, and the producers do not receive any subsidies.

The ongoing privatisation in the energy sector is aimed at further improvements of efficiency in the heating and the natural gas sector.

Electricity Market

The Republic of Latvia has transposed in its legislation the requirements of Directive 96/92 concerning common rules for internal electricity market.

Measure for implementation of the Directive is the Regulation of the Cabinet of Ministers No 326 of 21 September 1999 on qualified (eligible) electricity consumers. On 8 December 1999, the Cabinet of Ministers passed the Instruction on annual quantity of electricity consumption needed for obtaining status of qualified (eligible) electricity consumer in 2000. The Grid code was accepted by the Energy Regulation Council on 30 May 2000.

It is planned to complete implementation of the Directive by the date of accession.

Gas market

The Republic of Latvia will approximate its legislation with the requirements of Directive 98/30/EEC concerning common rules for internal gas market by the date of accession.

In the implementation of the Directive, the Republic of Latvia will apply the exclusion set out in Article 26(1) of this Directive until there is alternative gas supplier, and the market share of the only supplier has been reduced (is exceeds 75% at the moment).

Extraction of Hydrocarbons

The Republic of Latvia will approximate its legislation with the requirements of Directive 94/22/EC on the conditions for granting and using authorisations for the prospecting, exploration and production of hydrocarbons and will implement it by the date of accession.

On 8 February 2000, the Cabinet of Ministers has approved the following Regulations on oil works in the Baltic sea continental shelf owned by Latvia and in its exclusive economic area: No 51 On pre-investigation, exploration, and production of hydrocarbons, No 52 On tender procedure for licensing offshore activities of hydrocarbon pre-investigation, exploration, and production, No 53 On state fee for oil extraction, No 54 on Amendments to Regulation No 238 of July 8, 1997 Utilisation procedure of minerals, deposits, and entrails of the earth areas of national importance.

On 15 August 2000, the Cabinet of Ministers has adopted Conception on "Latvian State Oil Extraction Company".

Transparency: Electricity and Gas Prices; Energy Investments

The Republic of Latvia will, by the date of accession fully adopt in its legislation the requirements of Directive 90/377 concerning a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users, and  Regulation  2386/96 applying  Regulation  736/96 of 22 April 1996 on notifying the Commission of investment projects of interest to the Community in the petroleum, natural gas and electricity sectors

 The two big energy companies LATVIJAS GAZE and LATVENERGO manage the developing of information system for collection and analysis of the respective data. The companies co-operate with the Central Statistical Bureau of Latvia.

The Energy Regulation Council prepared the necessary data collection tables and in co-operation with Ministry of Economy will manage the process of investment project data solving in the petroleum, natural gas and electricity sectors.

Energy Efficiency

The Republic of Latvia will implement the requirements of Directive 78/170 on the performance of heat generators for space heating and the production of hot water in new or existing non- industrial buildings and on the insulation of heat and domestic hot-water distribution in new non-industrial buildings and Directive 92/42 on efficiency requirements for new hot-water boilers fired with liquid or gaseous fuels Directive 93/76 to limit carbon dioxide emissions by improving energy efficiency (SAVE), as well as another 11 Directives concerning labelling. These directives will be fully implemented  by the date of accession.

The Republic of Latvia will continue measures of heat supply system rehabilitation and energy efficiency within the National Investment Program.

In May 1999, the Energy Efficiency Fund started its activity. It grants loans for implementation of energy efficiency improvement related projects. The Building Department  of the Ministry of Environmental Protection and Regional Development has developed a National Building (Construction) Program and Program for Improving Heat Efficiency in Public Buildings.

Nuclear Safety

The nuclear safety policy of the Republic of Latvia is based upon the principles of Nuclear Safety Convention and Non-proliferation Treaty of Nuclear Weapons, EU legal norms and IAEA guidelines.

Latvia participates in the work of main EU working groups together with other EU Applicant countries and in the EU PHARE nuclear safety programme and DG Environment activities to speed up full implementation of a comprehensive legal and institutional framework in this sector.

The Law on Nuclear Safety and Radiation Safety adopted on December 1 1994, amended April 24 1997 regulates this area. An amended draft law is currently under examination in Parliament, which has approved it on second reading. Based on this law, the Cabinet of Ministers has issued the following regulations:

1. No 297 of December 12 1997, on protection against ionising radiation (amended in 1997 and 1998);

2. No 223 of June 20 1996, on issuance of licenses and permits for activities with radioactive substances and other sources of ionising radiation (amended in 1997 and 1998);

3. No 136 of April 4 1998, on accounting and control of nuclear materials.

As Latvia has neither any nuclear power plant nor any nuclear fuel cycle facility, the needs for nuclear materials are insignificant âÀ“ just for scientific purposes and mainly for chemistry. The Soviet designed pool type research reactor, which was built near Salaspils, 25 km from Riga, was finally shut down in June 1998. The German Company Preussag Noell KRC performed the conceptual study of decommissioning strategies under a contract with Latvia, and the second study was done under the EU PHARE contract by consortium AEA Technology. In accordance with a strategy, which was approved by the Cabinet of Ministers, the Research Reactor will be decommissioned within  10 years.

Regulators of the Energy Sector

The Republic of Latvia has established a regulatory institution framework in the energy sector.

The regulatory institution âÀ“ the Energy Regulation Council was established in 1996. It operates pursuant to the Energy Law by licensing the electric, heat, natural gas and LPG companies, by working-out the methodologies for tariff calculation to ensure the transparency of tariffs and prices, by approving the tariffs calculated by energy supply enterprises, and by developing and approving regulatory documents of the sector.

The Latvian Parliament is considering a draft law on establishment of common Regulator for all infrastructure branches. Until then, the Energy Regulation Council continues its functions.

Taking into account the aforementioned, the Republic of Latvia will request within the chapter "Energy" the negotiations on a  transitional period until 31 December 2010 for the implementation of Directive 68/414/EEC, as amended by 98/93/EC, and of Directive 73/238/EEC as regards the formation and maintenance of oil and oil product stocks equal to 90 days consumption.