significant step forward in Poland.   mcs
---------------------- Forwarded by Mark Schroeder/LON/ECT on 27/10/2000 
12:50 ---------------------------


Philip Davies
27/10/2000 11:50
To: Poland
cc:  

Subject: Poland sets plan to end long-term power contracts.


---------------------- Forwarded by Philip Davies/LON/ECT on 27/10/2000 11:43 
---------------------------
   
	Enron Capital & Trade Resources Corp.
	
	From:  djcustomclips@djinteractive.com                           27/10/2000 
11:07
	

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Subject: Poland: POLAND: Poland sets plan to end long-term power contracts.


POLAND:
Poland sets plan to end long-term power contracts.

10/27/2000
Reuters English News Service
(C) Reuters Limited 2000.

WARSAW, Oct 27 (Reuters) - A Polish government cabinet committee has approved
a scheme that will cancel long-term power contracts with compensation and
boost free trade in electricity, the government said on Friday.

Around 70 percent of Polish electricity, some 105-110 terawatt hours yearly,
is now sold under long-term contracts at fixed prices above market rates.
Their existence has effectively blocked market competition.
Under the programme, which still needs to be approved by the entire cabinet,
some 30 percent of the contracts are to be replaced by a compensation scheme
by the end of the year, while the entire wholesale market is to be free for
trade as of 2002.

The long-term energy contracts were signed with the Polish Power Grid (PSE) in
the early 1990s and were used by the biggest of Poland's 36 power generators
as collateral for modernisation loans received from commercial banks.

An inability to end long-term supply deals has delayed the creation of a
wholesale electricity market in which generators could compete for contracts
wih distributors and end consumers.

The government compensation scheme, which will allow for over-the-counter
trade in previously contracted power, should allow the market regulator URE to
free electricity prices.

The compensation, estimated at some 10-15 zlotys ($2.1-$3.2) per megawatt
hour, is to be paid by end users on the top of electricity bills.

But the price of electricity itself is expected to decrease as generators will
have to structure their prices on real supply costs.

The average end-user compensation fee is forecast to remain around 10-15
zlotys in real terms until the end of 2005, and then decrease to below five
zlotys or $1 per MWh by 2010.

The PSE will act as the system's administrator, breaking down the revenues
received from end users into supply costs and compensation to cover the
difference between previously contracted electricity prices and new lower
prices.



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