“ENERGY MONGOLIA-2013”
INTERNATIONAL CONFERENCE
STRATEGY ON SUSTAINABLE DEVELOPMENT OF
ENERGY SECTOR AND REGULATORY
FRAMEWORK
Chairman Mr. Otgonbayar, Sainbuyan
Energy Regulatory Commission /ERC/ of Mongolia
Ulaanbaatar, Mongolia
May 24-26, 2013
CONTENT
INTRODUCTION
I. LICENSING
II. ENERGY GENERATION AND CONSUMPTION,
ECONOMIC DEVELOPMENT ZONE
III. ENERGY RESOURCE OF MONGOLIA:
IV. TARIFF AND PRICING
2
ENERGY REGULATORY COMMISSION /ERC/
The Energy Law adopted at the Parliament of Mongolia on February
02, 2001 is based on:
the economic principles, market relations, sectorial and customers’
rights and duties, and the law legally set up Energy Regulatory
Authority, the body responsible for economic regulations.
The economic regulatory instrument:
has implemented its functions to grant a license,
monitor its
implementation through fixing relevant term and requirements, revise
and approve licensees’ tariffs, to set selling tariffs to consumers,
develop consumer’s connection instructions and Business rule and
to ensure their observance, within the framework of the legally
provided power and rule.
According to the amendment introduced to the Energy Law in
December 2011, the Energy Regulatory Authority was reorganized as
an Energy Regulatory Commission.
3
LEGAL FRAMEWORK OF REGULATION
LAWS MAINLY USED IN ENERGY REGULATION
 CIVIL LAW
 LAW ON LICENSING
 LAW ON ENERGY
 LAW ON RENEWABLE ENERGY
 LAW ON CONSUMER RIGHT PROTECTION
 COMPETITION LAW
Эрчим хүчний салбар дахь зохицуулалтын орчин
LEGAL FRAMEWORK OF REGULATION
RULES AND REGULATIONS
GOVERNMENT RESOLUTION OF MONGOLIA
 ELECTRICITY CONSUMPTION RULE
 HEAT CONSUMPTION RULE
SECTORIAL MINISRTY ORDER
 GRID RULE
 CENTRALIZED HEAT SUPPLY RULE
COMMISSION /ERC/ DECISION
 BUSINESS RULE AMONG THE LICENSEES
 BUSINESS RULE AMONG THE ENERGY SUPPLIER AND CONSUMER
 ELECTRICITY SPOT MARKER RULE
 ELECTRICITY COMPETITIVE MARKET RULE
 PROCEDURE ON REVIEW OF TARIFF PROPOSAL
I. LICENSING:
PRINCIPLES FOR ISSUING LICENSE
 A DECISION WHETHER TO ISSUE A LICENSE SHALL BE MADE WITHIN
60 DAYS FROM THE DATE OF RECEIPT OF THE APPLICATION FOR A
LICENSE;
 IN CASE THE APPLICATION AND ENCLOSED DOCUMENTS FAIL TO
MEET THE REQUIREMENTS, THEY SHALL BE RETURNED TO THE
APPLICANT WITHIN 10 DAYS FROM THE DATE OF RECEIPT;
 THE DECISION TO ISSUE A LICENSE OR A JUSTIFICATION FOR
REFUSAL SHALL BE PUBLISHED;
 A LICENSE SHALL BE GRANTED TO A FINANCIALLY CAPABLE LEGAL
ENTITY, WHICH POSSESSES EXPERIENCE OR IS ABLE TO OPERATE IN
THE GIVEN FIELD;
 IN CASE SEVERAL LEGAL ENTITIES SUBMIT APPLICATIONS FOR THE
SAME TYPE OF LICENSE, THE LICENSE SHALL BE GRANTED ON THE
BASIS OF COMPETITIVE TENDERING;
 LICENSE ISSUING PROCESS SHALL BE OPEN, PRECISE AND NONE
DISCRIMINATIVE MANNER.
BY DECEMBER 2012, THE ENERGY REGULATORY COMMISSION GRANTED MORE
THAN 10 TYPE OF 172 LICENSES IN TOTAL TO 87 ENTERPRISES AND
ORGANIZATIONS.
TYPE OF ACTIVITY
GRANTED LICENSE
Electricity and heat generation
23
Importation and exportation of electricity
16
Electricity and heat transmission
2
Electricity and heat distribution
56
Regulated supply electricity and heat
59
1
Dispatching
Construction of energy facilities
TOTAL
15
172
7
LICENSE ON CONSTRUCTION OF ENERGY
FACILITIES
FOLLOWING ARE SOME OF CONSIDERABLY THE BIGGEST THERMAL POWER PLANT
PROJECTS ACQUIRED A LICENSE ON CONSTRUCTION OF ENERGY FACILITIES, BEING
SUPPORTED BY THE SCIENCE AND TECHNOLOGY COUNCIL UNDER THE SECTORIAL
MINISTRY:

600 MW THERMAL POWER PLANT RELIED UPON THE CHANDGANA TAL COAL FIELD IN
THE TERRITORY OF MURUN SOUM, KHENTII AIMAG,

OYU TOLGOI 450 MW POWER PLANT IN KHANBOGD SOUM, UNMNUGOBI AIMAG,

600 MW THERMAL POWER PLANT RELIED UPON THE BUURELJUUT COAL FIELD IN THE
TERRITORY OF BAYAN SOUM, TUV AIMAG,

600 MW THERMAL POWER PLANT RELIED UPON THE TSAIDAM NUUR COAL FIELD IN
THE TERRITORY OF BAYAN SOUM, TUV AIMAG, AND

600 MW THERMAL POWER PLANT RELIED UPON THE ERDENETSOGT COAL FIELD IN
THE TERRITORY OF ALTANSHIREE SOUM, DORNOGOBI AIMAG.
IN TOTAL: 2850 MW
8
LICENSE ON CONSTRUCTION OF ENERGY
FACILITIES
WIND FARMS:





50 MW WIND FARM IN SERGELEN SOUM, TUV AIMAG,
250 MW WIND FARM IN KHANBOGD SOUM, UMNUGOBI AIMAG,
52 MW WIND FARM IN SAINSHAND SOUM, DORNOGOBI AIMAG,
100 MW WIND FARM IN DALANJARGALAN SOUM, DORNOGOBI
AIMAG, AND
50.4 MW WIND FARM IN SUMBER SOUM, GOBISUMBER AIMAG
IN TOTAL: 502.4 MW
9
LICENSE ON CONSTRUCTION OF ENERGY FACILITIES
Central energy system installed capacity and licensed new capacity /MW/
2850
3000
2500
2000
1500
1000
793.4
501.6
500
0
Operating CHP
Licensed Wind Farm
Licensed Condensation Electric
Power Plant
ALTHOUGH THE LICENSES ON CONSTRUCTION OF ENERGY FACILITIES WITH 3351.6 MW CAPACITY
WERE ALREADY GRANTED TO ENTERPRISES, PRESENTLY, THERE IS NO LICENSEE THAT HAS
FINALLY SETTLED AN INVESTMENT ISSUE AND COMMENCED A PROJECT CONSTRUCTION PHASE
IF NOT TO MENTION A “CLEAN ENERGY” LLC 50 MW WIND PARK THAT IS BEING ERECTED IN
SERGELEN SOUM, TUV AIMAG.
IN GENERAL, THE POLICY AND LINE TO BE PURSUED IN GRANTING A
LICENSE ON CONSTRUCTION OF ENERGY FACILITIES ARE
FORMULATED AS FOLLOWS:

TO BE BASED ON ENERGY SUPPLY-CONSUMPTION BALANCE,

TO SUPPORT ADVANCED ENVIRONMENTALLY FAVORABLE AND ECONOMICALLY
EFFICIENT TECHNOLOGIES,

A NEW ENERGY SOURCE TO BE CONNECTED TO THE CENTRALIZED SYSTEM
SHOULD BE DESIGNED TO OPERATE IN THE SYSTEM’S STATIC AND DYNAMIC
STABILIZATION REGIMES, GENERATE A MINIMAL VALUE OF GRAPHIC
DECLINATION AND REDUCE A CONSUMPTION OF IMPORTED ENERGY,

TO TAKE INTO ACCOUNT A POTENTIAL IMPACT THAT MIGHT BE IMPOSED BY
NEWLY COMMISSIONED ENERGY SOURCES ON THE TECHNICAL SPECIFICATIONS
OF THE CURRENTLY OPERATING PRODUCERS AS WELL AS ON THE CONSUMER’S
TARIFFS,

TO SUPPORT OR APPRECIATE A PRIVATE SECTOR INVESTMENT,

TO BE CAPABLE TO FINANCE AS MINIMUM AS 30 PER CENT OF TOTAL PROJECT
INVESTMENT FROM OWN SOURCES, AND

TO IDENTIFY EITHER A PRACTICABLE CURCUMSTANCE FOR ENERGY EXPORT HAS
BEEN PROVIDED OR NOT.
11
II. ENERGY GENERATION AND CONSUMPTION,
ECONOMIC DEVELOPMENT ZONE
Production and Consumption
Unit
CES
EES
4,575.5
137.5
Southern
region
WES
AUES
TOTAL
23.5
20.4
43.9
Production and Import:
Thermal Power Plant
mln.kW.h
25.0
4,738.0
Hydropower Plant
mln.kW.h
Solar and Wind Station
mln.kW.h
0.7
0.7
Diesel Power Plant
mln.kW.h
10.8
10.8
Electricity import
TOTAL
mln.kW.h
307.8
3.3
85.4
2.7
399.2
mln.kW.h
4,883.3
140.8
108.9
34.6
25.0
5,192.6
Electricity distribution
mln.kW.h
3,541.8
112.5
80.0
25.4
13.7
3,773.4
Heat distribution
thous.Gkal
6,763.1
208.1
15.2
6,986.4
Electricity export
mln.kW.h
21.0
Consumption:
21.0
Central energy system peak load in 2012 / by months, MW/
864
900
850
802
824
791
800
757
721
750
700
660
650
651
607
600
559
550
582
535
500
450
400
I
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
ECONOMIC DEVELOPMENT ZONE OF MONGOLIA
III. ENERGY RESOURCE OF MONGOLIA:
COAL RESOURCE:
 OF 150 BILLION TONS OF TOTAL COAL RESOURCE OF MONGOLIA, BY NOW, OVER 20
BILLION TONS HAVE BEEN IDENTIFIED THROUGH RELEVANT PRELIMINARY AND
DETAILED EXPLORATIONS AND PROSPECTING.
 CURRENTLY, THERE HAVE BEEN DISCOVERED OVER 200 COAL FIELDS, AND OUT OF
THESE, NEARLY 40 COAL FIELDS ARE BEING NOW EXTRACTED. SOME OF INTENSIVELY
EXTRACTED COAL FIELDS ARE:
 IN THE WESTERN REGION: NUURST KHOTGOR, KHAR TARVAGATAI AND KHUSHUUT,
 IN THE KHANGAI REGION: BULGAN AIMAG’S SAIKHAN-OVOO, BAYANKHONGOR
AIMAG’S JINST AND KHUVSGUL AIMAG’S MOGOIN GOL,
 IN THE CENTRAL REGION: TAVAN TOLGOI, BAGANUUR, SHIVEE ОVОО, TEVSHIIN GOBI,
ALAGTOLGOI AND KHANGAI, AND
 IN THE EASTERN REGION: ADUUNCHULUUN AND TALBULAG.
AS A RESULT OF CONDUCTING A PETROLEUM EXPLORATION WITHIN WHOLE THE
TERRITORY OF MONGOLIA, THERE WERE DISCOVERED NOT SO ABUNDANT
PETROLEUM RESOURCES IN THE EASTERN AND GOBI REGIONS. HOWEVER, NO
FLAMMABLE GAS RESOURCE HAS BEEN CURRENTLY REVEALED.
RENEWABLE ENERGY RESOURCE:
 ACCORDING TO THE RELEVANT STUDY, THE HYDROPOWER
CAPACITY RESOURCE OF MONGOLIA IS ESTIMATED AS 6417.7 MW,
AND THERE IS A POSSIBILITY TO PRODUCE 56.2 kW.h ENERGY PER
YEAR.
 FOR MOST OF THE COUNTRY’S TERRITORY, 270-300 DAYS ARE
SUNNY PER YEAR, WHILE THE AVERAGE DURATION OF SOLAR
ILLUMINATION; ANNUAL MEAN SOLAR ENERGY, AND THE DAILY
SOLAR INTENSITY ARE IDENTIFIED RESPECTIVELY AS 2250-3300
HOURS; 1400 kW.h/m2, AND 4.3-4.7 kW.h/m2.
 THE WIND POWER CAPACITY RESOURCE OF MONGOLIA IS
ESTIMATED AS 836.8 BILLION kW.h AND AN ANNUAL DURATION OF
ITS POTENTIAL EXPLOITATION IS 3500-4600 HOURS.
IV. TARIFF AND PRICING:
THE PRICES AND TARIFFS FOR RENEWABLE ENERGY ARE FIXED AS FOLLOWS
IN THE “RENEWABLE ENERGY LAW”:
IN CASE OF BEING CONNECTED TO THE TRANSMISSION GRID:

1 kW.h ENERGY PRODUCED AND SUPPLIED BY WIND POWER SOURCE:

1 kW.h ENERGY PRODUCED AND SUPPLIED BY HYDROPOWER PLANT
0.08-0.095$
WITH UP TO 500 kW CAPACITY:
0.045-0.06$

0.15-0.18$
1 kW.h ENERGY PRODUCED AND SUPPLIED BY SOLAR POWER SOURCE:
IN CASE OF INDEPENDENT OR SEPARATE SOURCES:

1 kW.h ENERGY PRODUCED AND SUPPLIED BY WIND POWER SOURCE:

1 kW.h ENERGY PRODUCED AND SUPPLIED BY HYDROPOWER PLANT
WITH UP TO 500 kW CAPACITY:

0.08-0.10$
1 kW.h ENERGY PRODUCED AND SUPPLIED BY HYDROPOWER PLANT
WITH 500-2000 kW CAPACITY:

0.10-0.15$
0.05-0.06$
1 kW.h ENERGY PRODUCED AND SUPPLIED BY HYDROPOWER PLANT
WITH 2001-5000 kW CAPACITY:
AND
0.045-0.05$,

0.2-0.3$.
1 kW.h ENERGY PRODUCED AND SUPPLIED BY SOLAR POWER SOURCE:
PRINCIPLES FOR DETERMINING TARIFF IS IDENTIFIED IN LAW
ON ENERGY AS FOLLOWS:
 TO SET THE TARIFF BASED ON ACTIVITY REAL COSTS
EXPENSES;
AND
 TO ENSURE APPROPRIATE DEGREE OF REVENUE IN WHICH
REQUIRED COSTS AND INVESTMENT RETURN OF LICENSED
ACTIVITY SHOULD BE CALCULATED;
 TO PROVIDE PRICE SUSTAINABILITY;
 THE LICENSEES REVENUE THAT COULD ENSURE ITS FINANCIAL
STABILITY;
17
CENTRAL ENERGY SYSTEM ELECTRICITY PRIME COST PER UNIT
/Performance by 2012/
1.
1.
2.
Production cost
48.22 MNT/kWh
Transmission
cost
5.22 MNT/kWh
3.
4.
Transmission
loss
1.76 MNT/kWh
Distribution loss
8.03 MNT/kWh
5.
Distribution cost
21.34 MNT/kWh
Mining
consumers
Industry and enterprises
Households
Cost per unit 84.56 MNT/kWh
Cost structure of Central Region Licensees’
(performance by 2012)
Thermal Power Plant cost
structure
/mln ₮/
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
13.4
%
23.2
%
17.0
%
169,252
.3
22,739.
160,000
4
140,000
39,319.
120,000
4
100,000
28,812.
0
80,000
Electricity transmission grid
Central region distribution
/mln ₮/
network /mln ₮/
35,000
100,000
Төвийн бүсийн ТЗЭ-дийн зардлын бүтэц (2011 оны тарифт
90,000
тусгагдсанаар), сая төг
75,548
30,000
145,367.6
25,000
16,346.0
20,000
33,142.3
15,000
20,658.7
60,000
78,381.
40,000
5
20,000
10,000
18.1
%
37.7
%
21,149
.1
3,830.
0
7,981.
0
17,776.6
9,338.
3,048.4
44.2
1
7,669.1
%
7,059.1
0
0
transmission
grid
Central region TPPs'
Төвийн бүсийн ДЦС-ууд Electricity
Цахилгаан
дамжуулах сүлжээ
46.3
%
75,220.6
5,000
Fuel cost
Түлшний
зардал
Salary зардал
Цалингийн
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
.3
31.9
%
24.1
56,795.1
%
24,103
.8
18,215
.7
33,228
17,205.1
.8
44.0
13,975.1
%
25,614.9
Central region distribution
Төвийн бүсийн ТС-нүүдnetworks
Depreciation
Элэгдлийн
зардал
Others
Бусад
зардал
Electricity cost per unit (performance by 2012), MNT/kW.h
100.00
8.03
90.00
91.64
21.34
80.00
70.00
60.00
7.08
5.22
Heat crosssubsidy
Electricity
transmission
cost
1.76
Average
selling price
88.21
MNT/kW.h
50.00
40.00
30.00
20.00
48.22
10.00
0.00
TPPs' production
and import
Transmission
loss
Distribution and Distribution loss
supply cost
Total
Central Region Licensees' heat cost structure
(performance by 2012)
Т өвийн бүсийн Т ЗЭ-дийн зардлын бүтэц (2011 оны тариф т
тусгагдсанаар), сая төг
16 0,00 0
145,367.6
14 0,00 0
16,346.0
12 0,00 0
33,142.3
10 0,00 0
20,658.7
80 ,000
56,795.1
60 ,000
17,776.6
40 ,000
75,220.6
20 ,000
0
Төвийн
бүсийн ДЦС-ууд
Түлшний зардал
Fuel cost
3,048.4
7,669.1
7,059.1
Цахилгаан дамжуулах сүлжээ
Цалингийн
Salary
зардал
Элэгдлийн
17,205.1
13,975.1
25,614.9
Төвийн
зардал
Depreciation
Central region average selling price 12,295.5 MNT/Gkal
бүсийн ТС-нүүд
Бусад зардал
Others
IN GENERAL, THE ENERGY REGULATORY COMMISSION
FORMULATES ITS POLICY AND LINE TO BE PURSUED FURTHER
ON PRICE AND TARIFF AS FOLLOWS:
 TO CREATE A PRICE AND TARIFF SYSTEM BASED ON THE FUNDAMENTAL
MARKET ECONOMY PRINCIPLES, AT THE PRODUCTION-SUPPLY LEVEL,
 TO FIX TARIFFS THAT COULD ENSURE FINANCIAL STABILITY OF LICENSEES,
RELYING ON REAL COSTS AND EXPENSES,
 TO CONSIDER SOCIAL FACTORS WHILE FIXING PRICE AND TARIFF. If concretely,
it involves issues concerned with protection of consumers interests, considering a
tariff of low-income social groups and support of efficient energy consumption,
 TO INTRODUCE A CAPACITY AND ENERGY TARIFF BY COMPUTING ENERGY
COST AND EXPENSE WITH THE CONSIDERATION OF A LOAD IMPOSED BY
CONSUMERS ON ENERGY SUPPLY SYSTEM,
 TO DEVELOP AND ADHERE A TARIFF METHODOLOGY THAT COULD ENSURE
PRICE STABILITY IN ORDER TO AVOID OF FREQUENT CHANGES IN ENERGY
CONSUMER’S TARIFF AND PRICE,
 TO DEVELOP A METHODOLOGY FOR ALLOTING THE FUEL AND FIXED COSTS
OF THERMAL POWER PLANTS AMONG ELECTRICITY AND HEATING IN ORDER
TO COMPUTE PRIME COST OBJECTIVELY STARTING FROM THE PRODUCTION
PROCESS.
21
EVERYONE CLEARLY UNDERSTANDS THAT FOR THE PROMOTION
AND DEVELOPMENT OF OTHER NATIONAL ECONOMIC SECTORS,
IT IS SPECIFICALLY IMPORTANT TO OPERATE BY FIXING ENERGY
PRICE AND TARIFF CORRECTLY, AND ENSURING A PRICE
STABILITY.
IN THIS SENSE, THE ENERGY REGULATORY COMMISSION HAS A
SPECIFIC FUNCTION TO MAINTAIN FOLLOWING TWO INTERESTS IN
A PROPER BALANCED WAY. THESE ARE:
TO SET COST-BASED TARIFF OF ENERGY LICENSEES ON THE ONE
HAND, AND TO TAKE IN CONSIDERATION THE IMPACT OF
RELEVANT SOCIAL FACTORS WHILE FIXING CONSUMER’S PRICE
AND TARIFF ON THE OTHER HAND.
22
THANK YOU FOR YOUR ATTENTION
ENERGY REGULATORY COMMISSION OF
MONGOLIA
Address: 14201, Ikh surguuliin gudamj 2a, Sukhbaatar district,
Ulaanbaatar
Tel:
976-11- 320126
Fax:
976-11- 319335
E-mail: info@erc.mn
Web:
www.erc.mn
23