CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

1. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES A Look at Our Neighbours – the Central American Electricity Integration Presented by: Jeffrey Locke Chief Executive Office, BEL

2. Sistema de InterconexiónEléctrica de los Países de América Central(SIEPAC) 1,800 kilometers (km) transmission lines 230 kV towers double circuit, 15 substations 28 access nodes 300 MW capacity

3. Sistema de InterconexiónEléctrica de los Países de América Central (SIEPAC) Sistema de IntegraciónCentroamericana, SICA agreed to: • Pursue efforts of integration and Mesoamerican development, in the Tuxtla Mechanism for Dialogue and Cooperation, created in 1991 in specific areas including energy; • Resolution 6.2 of the XIII Summit Tuxtla Mechanism for Dialogue and Cooperation, instructed the electric sector actors to conclude the construction of the transmission line connecting its member states, and create Regional Electricity Market rules (MER) and thus, a fully functioning market; One of the most important milestones in the regional electrical integration process was the signing of the SIEPAC Framework Treaty in 1996 by the six countries in the region (Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica and Panama).

4. SIEPAC Framework Treaty and Protocols • The Framework Treaty provides the rules and objectives for the transparent and non-discriminatory regulation of the operation of the MER and the relationships between market players. • The Framework Treaty states that the participation of agents in the MER will be governed by the rules contained in the Framework Treaty, its Protocols and Regulations. • Framework Treaty and its Protocols establishes the Regulation (RMER) as valid, mandatory and binding on the territory of member countries to regulate the functioning of the market, the technical and commercial operation of the MER, transmission service, regional organizations and the participation of market players and their functional relationship with regional organizations.

5. Regional Energy Market (MER)

6. SIEPAC Institutions Governance: The Regional Regulation (RMER) supported by the Framework Treaty, its Protocols and resolutions of the CRIE establishes the rules governing the operation of the MER. Institutional Structure of the Regional Energy Market (MER): • The Regional Transmission Network Company (EPR) owns the SIEPAC grid and SIEPAC member states are the shareholders. • The Regional Electric Interconnection Commission (CRIE) is the regional body responsible for ensuring compliance • The Regional Operating Agency (EOR) is the regional body responsible for the implementation and operation of the SIEPAC Grid (RTR) • National agencies including Local Market Operators and Market Systems/Agencies (OS / OM) of each of the member countries that are involved in the operation of the MER and interact with the Regulation and Regional Organizations.

7. Regional Energy Market (MER) The MER is a wholesale electricity market at the regional level. Purpose/Mission of the MER: To benefit the people of the member countries through economic and timely supply of electricity and the creation of conditions that develop greater reliability, quality and safe power supply in the region. Objectives of the MER: • Optimization of energy resources used for the regional electricity supply; • Allow the development of generation projects to supply regional demand; • The viable development of regional transmission networks; • Increase reliability and economic efficiency in the supply of electricity; • Mix the operational criteria of quality, safety and performance, and • Promote the participation of the private sector competitive.

8. Regional Electric Interconnection Commission (CRIE) CRIE is empowered to: • Approve the regulations necessary to regulate the administration and operation of the MER; • To approve the fees for the use of the RTR; • Approve service charges for system operation provided by the EOR; • Impose sanctions established by the Protocols in relation to breaches of the provisions of the Treaty and its regulations; • Resolve conflicts between MER agents arising from the implementation of the Regional Regulation; • Take measures to prevent the abuse of dominant positions of any market, and • Request information to market players, OS / WHO and EOR. The resources to finance the operations of the CRIE come from fee regulation, MER services and other fees paid by market players, government contributions, collection of economic sanctions and other sources as set out in the Framework Treaty.

9. Regional Electric Interconnection Commission (CRIE) The CRIE regulates the operation of the MER and the relationships between agents in accordance with the provisions of the Framework Agreement, its Protocols and Regulations. Objectives of CRIE: • To enforce the regulations established in Regulation MER Regional; • Ensure the development and consolidation of the MER; • To ensure transparency and proper functioning of the MER, and • Promote competition among market players

10. Regional Operating Agency (EOR) The EOR directs and coordinates the technical operation of the MER and performs business management with technical and economic criteria according to the Regional Regulation approved by CRIE. Functions of the EOR: • Propose technical, commercial and operational procedures governing use of the RTR to CRIE; • Ensure that the operation is conducted in accordance with economic criteria also respecting the key quality, safety and performance criteria; • Oversee, in coordination with the OS / WHO, business transactions between market players; • Prepare the indicative expansion plan for regional generation and transmission; and • Support the provision of information about the MER. Funding sources for EOR operation will come from the system operation charges and market administration approved by the CRIE, other fees paid by market participants, collection of economic sanctions and other sources as it is provisions of the Framework Treaty.

11. Update on SIEPAC Action Plan The following actions agreed upon by the SIEPAC members to advance toward the consolidation of the Mesoamerican Electricity Market: Infrastructure and Investments • Finalization of SIEPAC’s physical infrastructure by the end of 2014. • Conduct the investments necessary for each country to adapt the commercial metering capacity • Prioritize investments in reinforcement of national transmission infrastructure

12. Update on SIEPAC Action Plan Regulatory and Institutional Aspects • Strengthen the governance and functionality of the MER through the establishment of a Market Oversight Group (Grupo de Vigilancia del Mercado), the implementation of conflict resolution mechanisms and capacity building of CREI. • Promote, by December 2014, the implementation of the regulatory framework that permits transactions through Fixed Contracts and suitable Transmission Rights scheme.

13. Update on SIEPAC Action Plan Strengthening and Expanding Regional Mesoamerican Integration • Implement formal mechanisms for expansion planning of regional generation and transmission that is consistent with the national plans. • Establishing an Annual Investor Forum to foster a dialogue with the private sector on policy, regulatory, operational, and market issues fundamental for the development of the Mesoamerican power sector. • Continue the efforts to rely on regulation for the integration of extra-regional interconnections, such as Mexico, Colombia, and Belize, which enable a harmonious operation with the MER regulation and which is conducive to energy exchanges to the benefit of Mesoamerica.

14. Thank You! Belize Electricity Limited 2 ½ Miles Philip Goldson Highway, Belize City, Belize Corporate Tel No.: 501-227-0954, Facsimile No. 501-223-0891 Email Address: info@bel.com.bz, Website: www.bel.com.bz

15. General Guidelines of the MER The organization and operation of the MER is based on the following premises: • Business transactions are conducted through exchanges of electricity and regional economic dispatch through contracts between the market players; • Market players except can buy and sell electricity freely without discrimination of any kind and is guaranteed free transit of electric power across the grids in MER member countries; • Market players may install generating plants on any of the networks of MER member countries to produce and market energy for the region; • Market players have free access to the regional transmission networks (RTR) and national grids. • The MER is a market with its own rules, independent of the national markets of the member countries. • The connection points between the MER and domestic markets are the nodes of the RTR. Market Agents may be natural or legal entities engaged in the generation, transmission, distribution and trading of electricity and large consumers. Agents of the domestic markets participating in the MER are subject to the terms and conditions of RMER.

16. General Guidelines of the MER • The national regulations of the Member States shall conform to regulations of the MER (RMER); and as a minimum, must meet the following requirements: • Allow international electricity transactions; • Apply principles of non-discrimination and reciprocity regarding international transactions of electricity; • Allow the contracts between regional actors/agents; • Incorporate international transactions in conjunction with the national economic dispatching transactions; • Provide coordinated regional operation of plants belonging to the RTR; • Respect the criteria of quality, safety and performance; • Allow free and non-discriminatory access to national transmission networks; • Maintain monitoring systems, control, communications and commercial metering required for coordinated regional operation; • To ensure free access to information on the MER and RTR as set out in the RMER; • To take the necessary measures to ensure the effective and uniform application of the sanctions regime MER, and • Take the necessary measures to guarantee the payment obligations in the MER.

17. Operators and Market System OS / OM The OS / WHO coordinated the operation of electrical systems and business management among its agents in EOR. The OS and OM are required to: • Implement and enforce the Regional Regulation; • Provide all information required by CRIE and EOR; • Coordinate the planning and RTR operation with guidelines set by the EOR: • Collaborate and coordinate with management EOR transmission rights; • Coordinate with the EOR, on behalf of its agents, scheduling, settlement, billing and settlement of transactions in the MER; • Maintain the criteria of quality, safety and performance • Comply with the requirements of monitoring, control, communications and commercial metering established in RMER; • Communicate timely information to its agents recorded by EOR; • Communicate timely information to EOR collected by their agents; • Submit to EOR and CRIE a list and record all information including its agents and market participants; • Make observations to the performance of EOR, as to the application of rules and procedures in this Regulation. • To propose and review changes to the Regulation.