Regulatory Framework

REN operates primarily in the energy and natural gas sectors, along with secondary involvement in the telecommunications sector. As a result, its activities are subject to government regulation on a number of fronts. Given the nature of the services it provides, and given that the majority of REN's share capital is held by public companies, particularly Parpública and CGD, REN qualifies as a public company under Portuguese law (Decree-law no. 558/99 of 17 December).

The Portuguese energy sector underwent a significant restructuring during 2006, as a result of the implementation of EU Directives on electricity and gas (Directives 2003/54/CE (the "Electricity Directive") and 2003/55/CE (the "Gas Directive") of the European Parliament and Council, both of 26 June) and of the definition of new strategic objectives, principles and general guidelines.

The main objectives of this restructuring are (i) to safely guarantee the supply of energy to Portugal, through the diversification of the primary resources used (namely by reinforcing the development of renewable energy sources aiming to achieve, by 2010, 39% of electrical output from renewable sources, a number which has been raised to 45% in recent Government declarations) and through the promotion of efficiency, (ii) to stimulate and favor competition in a way as to promote consumer protection, as well as the competitiveness and efficiency of the Portuguese companies operating in the energy sector and in the national production sector and (iii) to ensure the energy sector meets certain environmental standards, reducing the environmental impact at the local, national and global levels.

The responsibilities for regulation of the energy sector in Portugal are now [generally] split between the Direccção Geral de Energia e Geologia ("DGEG"), the Entidade Reguladora dos Serviços Energéticos ("ERSE") and the Competition Authority.

Electricity Regulatory Framework 

Activities that will be reduced under new regulation