1. 1
THE LAUNCH OF A TRADING PLATFORM
A story of success, a matter of life
LE LANCEMENT D’UNE PLATEFORME DU COMMERCE
Une histoire de succes, un fait de vie
VICTOR IONESCU
LUCIAN PALADE
ROMANIAN POWER MARKET OPERATOR OPCOM
ROMANIA
THE BEGINNING
In the first years of the century, to build a spot market in South Eastern part of
Europe before privatizing the assets should had made somebody smiling. This was
happened in Romania. Looking to the UK electricity market, people were convinced
that the golden rule of market liberalization was to begin with privatization. This
time the Scandinavian presentations tried to warn, reminding their regional pattern:
“the privatization was not an issue”.
Started in a rainy day, September 2000, with demand increasing from hour to hour,
the emerging market provided by OPCOM, Romanian power market operator didn’t
provide great expectancies. But once it began, the Romanian electricity spot market
adventure was never stopped. Looking to the first mechanisms provided by the
initial Romanian wholesale electricity market commercial code, you can perceive
them as primitives, rough, even not quite fair.
But even the primitives’ wood paintings are having their pure, raw fascination.
Despite or maybe grateful to the existing criticism, the market matured, preparing
the critical mass to foster the changes in early 2005. The successful combination of
mechanisms’ change and market more opening ensured the chapter 14 closure as
condition for Romania’s EU accession.
THE WIND OF CHANGE
European Commission and World Bank supported the new concepts implementation
by surprisingly but efficiently shaking their hands. International consultancy based
donors’ loans, co-financing and grants induced brainstorming debates in the
Romanian electricity field.
When working groups were discussing the mechanisms, others were calculating the
liberalization impact by businesses and assets unbundling and electricity market
every year more opening. The newcomers were more and more improving the
wholesale market concentration on both sides. The middle of 2005 saw a dare but

2. 2
welcomed official degree of the market opening as 83.5%. Just enough to push the
regulated market down to 50%.
TO BE FREE TO PLAN THE GENERATION, TO BE RESPONSIBLE FOR REAL
TIME IMBALANCES, TO BE RECOMPENSATED FOR BALANCE SUPPORTING
For long time, the lack of penalties for imbalances between the day ahead schedules
and the real time operation, combined with lack of specific rewards to support the
system balance were raising the concerns regarding the effectiveness and fairness
of rules. It was also combined with the lack of freedom in making programs after,
not before trades’ confirmation. The new rules of balancing offers, imbalances’
penalization and self-scheduling were changing the framework: more freedom,
more discipline and more commerce. Accepted or not, the new multi-market
concept was growing Romanian roots in preparatory years 2003-2004. There were
the years when also Western Europe calibrated balancing mechanisms and defined
their rationales besides the spot and intra-day markets.
GIVE THEM THE REAL PRICE AND CHANGE THEIR MIND
In an ongoing transition process that seems to become a never ending story, a
culture of concerns, reluctance and disputes easily can raise. The real price of
electricity may be a tale of mystery if the regulated prices stay too much in a
market intending to become free. “I want to know the God’s thoughts….The rest are
details.” said once upon a time Einstein. To know the real price of electricity was our
aim. In a business oriented framework all other debates regarding forecasts, fuels’
stocks, power plants’ reliability, starts and stops had become details, a story with
domestic problems. Never forgotten by market participants, always available to
discuss them, we advise you to avoid if “power exchange” is written in your by-law.
In a competitive framework, the price is driving decisions: to produce if the price is
high or better stay and purchase if the price is low. The participants learned easily
how to perform and the marketplace is achieving quickly its role.
A NEW MECHANISM ENABLING THE PRICE DISCOVERY
No other mechanism to discover the real price is more reliable and even more
illustrative for scholastic purposes than the matching between the aggregated
curves of sales and purchases intentions expressed in day ahead in every power
exchange in Europe.
Without regrets OPCOM marketplace erased the past by throwing tools and
experiences, skills and memories through the largely open windows. Only the
challenge culture was kept, as a guarantee to permanently focus on European
acquis and best practices in European exchanges. It was helpful that, instead
regretting death of the former mechanisms to remember OPCOM’s old logo
(ascending and descending curves intersection) as an aim to foster the
implementation of a new concept: the two side auction. An equal role for sellers and
buyers in expressing their willingness is a proof of fair competition.

3. 3
A temporary concern regarding the lack of suppliers’ ability to forecast their needs
had generated long debates asking for provisions envisaged to smooth transitional
dummy actions’ unpredictable effects.
But these concerns were proved as not substantiated and were removed by just the
suppliers’ promising reports revealing unexpected precision in making forecasts. An
empirical expectation that “to forecast more means to forecast better” was not
confirmed in this case. We were forced to accept that if a wholesale forecast is a
matter of data gathering and mathematic issues mastering, for retailers it is a
matter of only keeping in hand the relation with customers based contractual
clauses. At least if we talk about non households. To grab the changing demand
profiles is a fact of rhythm and care.
AND THE SHOW HAS BEGUN
Once rules, IT platforms and procedures implemented, the show might begin. Or
better not. It can be harmful consequences rising if something is missing or badly
working. A market trial is always recommended. For six months, no more, no less,
the actors repeated their speeches, entering in the characters’ skins. The scenery
also improved, the platforms were polished, and new decorations were rising.
When the gong was hit by the regulator and the curtain was raised the lights didn’t
stop as some malicious predicted.
In June 30th
, the market operators’ older or newer friends welcomed a new
European trading platform launched and for the beginning a more than 10% quota
captured by the spot market segment.
TWO YEARS OPERATION. TIME OF STATISTICS.
After a transient period, when the spot market quota succeeded more than 10%
this indicator decreased and stabilized like in a well controlled automatic system to
almost 7% in 2005, 8%,in 2006 and 10% in 2007. This is ensuring to the Romanian
spot market an honorable place in Europe, its quota representing more than each
Eastern PXs quota, but less than the western ones.
Fig.1. PX Quotas in Europe
0%
25%
50%
75%
100%
December
2005
February
2006
April
2006
June
2006
August
2006
October
2006
December
2006
February
2007
April
2007
June
2007
August
2007
October
2007
Nord Pool - Oslo
OMEL - Madrid
EEX - Leipzig
APX - Amsterdam
Pow ernext - Paris
Belpex - Brussels
OPCOM - Bucharest
EXAA - Vienna
TGE - Warszaw a
OTE - Prague
Borzen - Ljubljana

4. 4
Figure 2. PX Quotas in Europe. Last two months detail.
A not so high volatility may be observed, enough to give to the price a consistency
bringing trust in its reference role as incentive for future investments and financial
market’s underline. The liquidity given by the average of 582 MWh/h traded day
ahead in the first 10 months of 2007 is the most relevant in East and is providing a
promising starting point for regional intentions.
Fig.3. Price evolution
A similar behavior as spot market quota its concentration is having. After two
months under the water’s menace and due to the increasing participants’ number
beneficial influence, the HHI index went down under 1.000 value, the representative
limit for not concentrated market.
Not only water excess disappearing but also participant number increasing as a
market opening result, the concentration remained low in 2006 and 2007, even in
the critical months: July, August. The number of active participants stabilized also
at almost 50 from now 97 registered participants.
38,95
46,73
55,39
67,39
56,45
50,79
45,96
42,48
45,68
62,92
47,11
57,91
53,88
52,59
41,33
31,83
33,44
39,41
21,09
26,03
35,02
39,80
47,31
40,80
36,71
45,87
40,66
41,03
0
10
20
30
40
50
60
70
80
July
2005
August
2005
September
2005
October
2005
November
2005
December
2005
January
2006
February
2006
March
2006
April
2006
May
2006
June
2006
July
2006
August
2006
September
2006
October
2006
November
2006
December
2006
January
2007
February
2007
March
2007
April
2007
May
2007
June
2007
July
2007
August
2007
September
2007
October
2007
[Euro/MWh]
Average prices
0%
25%
50%
75%
100%
De October
2007
Nord Pool - Os lo
OM EL - Madrid
EEX - Le ipzig
APX - Am s te rdam
Pow e rne xt - Paris
Be lpe x - Brus s e ls
OPCOM - Buchare s t
EXAA - Vie nna
TGE - Wars zaw a
OTE - Prague
Borze n - Ljubljana

5. 5
Fig.4. HHI for sales
Fig.5. Number of registered participants.
Fig.6. Number of the active participants.
20
25
30
35
40
45
50
55
60
Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07
Active participants in bidding process Active participantsin trading process
46
48
52
54
58
65
69
71
72
74
75
76
78
79
80
84
86
92
95
95
95
95
95
95
99
98
97
97
40 50 60 70 80 90 100
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
2,089
875 951 1,035
762 794 967
1,203
708 854 773 754 617 612 739
4,957
670
525 526 452
666
1,332 1,179
602
577
684614
0
2,000
4,000
6,000
8,000
10,000
Iuly
2005
August
2005
September
2005
October
2005
November
2005
December
2005
January
2006
February
2006
March
2006
April
2006
May
2006
June
2006
July
2006
August
2006
September
2006
October
2006
November
2006
December
2006
January
2007
February
2007
March
2007
April
2007
May
2007
June
2007
July
2007
August
2007
September
2007
October
2007
HHI-sell
10.000
1.800
1.000

6. 6
The active participants’ number had became stable the last one among other
indicators, expected being to perform a new transition to another level when the
market will achieve its full opening in the middle of 2007.
THE TASTE OF SUCCESS
To not rest to much, to not forget the taste of success, to serve the market trends,
OPCOM framework enriched late fall 2005 with two new other products as
centralized markets: the green certificates and the bilateral contracts.
Operating independent from electricity market, the green certificates market is
providing incentives for the renewable based producers according to supplier’s
obligation to own a quota of certificates depending on consumption. A TGC based
system is integrating in a flexible way diverse technologies rewarding, but it is still
challenged by the lack of liquidity, being more an incentive than a permanent
opportunity to trade.
Fig.7. Green certificates market performance
It was a common aim of European Commission and World Bank strategy papers to
foster the implementation of a contract exchange in order to ensure the
transparency in bilateral contracts concluding. Good to be remembered that both
entities are envisaging a phased approach in the region, beginning with bilateral
contracts. Technical Group was established by marketplace and participants, the
intentions being to evolve towards a more standardized package of products to
market expectancies meet.
102 79 113 78 90 78 101
18.541
1.453
581 308 219 182
3.258
1.008
2.807
2.325
289 56
5.997
899
34 104 166
0
4.000
8.000
12.000
16.000
20.000
November
2005
December
2005
January
2006
February
2006
March
2006
April
2006
May
2006
June
2006
July
2006
August
2006
September
2006
October
2006
November
2006
December
2006
January
2007
February
2007
March
2007
April
2007
May
2007
June
2007
July
2007
August
2007
September
2007
October
2007
NumberofGreenCertificates
32
34
36
38
40
42
44
46
[Euro/certificate]
Traded Volume (Number of Green Certificates) Market Clearing Price

7. 7
Fig.8. Centralised Bilateral contract market.
BUILDING CAREFULLY AN ATTRACTIVE PROPOSAL FOR SURROUNDING
COUNTRIES
The general performance’s numbers looks good, the national framework ensuring
enough liquidity to be self sustainable. But just this self sustainability is
recommending the Romanian spot market as strong enough for a care and balanced
approach of the regional dimension.
The development of the SEE electricity market can be characterized with the
following remarks:
− Several independent countries aim operate together to establish a wholesale
electricity market not limited by their national borders.
− There is political consensus to form a common wholesale market to optimize
the use of the total power resources in the region, consensus evolving from the
two memoranda stage to the legally binding Treaty signing.
− A regional regulatory framework is in the process of being established including
binding procedures incorporated in legal agreements and guidelines for both
system operations and for market operation in the region.
− There is a common understanding that development of a regional market is a
stepwise process where regional harmonization is made on issues required to
form a common wholesale market and where local methodologies based on
national experiences and traditions are accepted to the extent it do not
interfere with the overall objectives.
The regional power exchange based OPCOM structure will have as objectives: to
increase the electricity trade in South East Europe, by providing a reliable
counterpart in the process of the trades’ settlement. Regarding the electricity
systems in the region, the regional power exchange will also support the
improvement of their reliability in short term and also their long term adequacy. It
460.320
22.320
93.600 45.300
156.840
831.840
1.765.920
1.502.640
697.440
0 62.520
527.040
219.600
2.496.270
2.950.850
87.600
1.044.360
224.450
47.06530.870
2.1600
547.384
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
3.000.000
3.500.000
December
2005
January
2006
February
2006
March
2006
April
2006
May
2006
June
2006
July
2006
August
2006
September
2006
Octomber
2006
November
2006
December
2006
January
2007
February
2007
March
2007
April
2007
May
2007
June
2007
July
2007
August
2007
September
2007
October
2007
ContractedQuantity[MWh]
0
5
10
15
20
25
30
35
40
NumberofBilateralContracts
Contracted Quantity Number of Bilateral Contracts

8. 8
will be possible to achieve these aims by putting the systems in balance in short
term utilising efficiently the existing resources through implicit auctions which will
provide consistent price signals for long term investment.
The basis for a consistent spot price setting for the whole region is the existing
liquidity of the Romanian day ahead market, improved by allowing the participation
of regional market players in equal positions, by transparent and non-discriminatory
market conditions providing.
The regional entity will implement day-ahead, implicit auctions as market-based
method to simultaneously accommodate trade of the electricity commodity and
available interconnection capacity. The market place will undertake the counterparty
role for electricity trading. In a day-ahead, two-sided, closed auction the regional
power exchange will establish hourly prices and volumes based on bids from
participants and allocated cross-border capacity. The so called implicit auction will
coexist with the explicit auctions under the umbrella of the regulators guidelines and
TSOs agreements.
The proposed entity and market products will support the implementation of the
electricity market in SEE as an aim of the Energy Community Treaty, based on a
decentralised organization and an open ownership.