OREANDA-NEWS. So far, the Public Trader's obligation to perform mandatory procurement functions has been provided by Latvenergo AS. Once the electricity market is opened completely, the mechanism for restricting the increase of the mandatory procurement component (MPC) is developed and the state budget subsidies are introduced, this will no longer be a valid mechanism.

A separate public limited company must be established so that a state budget subsidy may be used in the open electricity market to cover mandatory procurement expenses, covering part of users' electricity costs. Because a merchant operating within a competitive market may not receive budget subsidies, this task will no longer be performed by Latvenergo AS but handed over to a newly established subsidiary. The new company will commence operations on 1 April 2014 and take over the mandatory procurement functions currently handled by Latvenergo AS. Registered and paid share capital of EPT is EUR 40,000. In the share capital has been invested cash.

Electricity purchased as part of the mandatory procurement is bought at higher state-mandated tariffs and is sold on the electricity exchange at the market price. The difference between electricity prices and the expenses on ensuring such trading represent the annual expenses that have to be compensated, which determine the amount of the MPC effective from 1 April of each year. In accordance with the applicable legislation, EPT will conduct the mandatory procurement of electricity that will be sold on an exchange. Considering the expenses on the mandatory procurement compensated on a yearly basis and the state budget subsidy, EPT will perform calculations of the MPC each year and submit the figures for approval to the Public Utilities Commission (PUC). The PUC will review the calculations and approve the MPC, which will be included in customers' invoices for electricity consumed starting from 1 April of each year.