Annual Report - EDP

notes to the EDP consolidated - Energias de Portugal, and company S.A. financial statementsNotes to for the the Consolidated years and ended Company 31 december Financial Statements 2012 and 2011for the years ended 31 December 2012 and 2011The referred Law 54/1997, as amended, provides, among others, the following basic principles:GenerationSince 1 January 1998 electricity generation operates on a free market competition basis, which covers the purchase and sale of energy and other services related tothe supply of electricity.The market structure for electricity generation has been widened by Law 17/2007 of 4 July, in order to include the forward market and the intraday market, as well astechnical issues, complementary services, deviations management and non-organised markets. The organisation and regulation of the market for electric powergeneration is defined by Royal Decree 2019/1997 of 26 December, and its implementing standards.Electric energy is paid at the system's marginal price plus a component for the adjustment services necessary to ensure an adequate supply. Additionally, the OrderITC/2794/2007 of September 27, which revised the electricity tariffs from 1 October 2007, replaced the concept of "power availability" remuneration of electricitygeneration by the concept of "capacity payments" stated in article 16 of the Law 54/1997 (amended by Law 17/2007), which sets a remuneration of the availabilityservice - for the procurement of capacity in the medium term - and the incentive to invest in long-term capacity.The installation of new generation units is liberalised, subject to obtaining the necessary permits.Producers have the right to use primary energy sources in their generation units as deemed most appropriate, with the restrictions applicable to the environment. Asa consequence of a pre-notification of European Commission, the Royal Decree Law 1221/2010 of 1 October was approved and changed the Royal Decree Law134/2010 of 12 February and establishes the procedure for supply restrictions, as a protective measure to promote the consumption of local coal. From theendorsement of Royal Decree Law 14/2010 of 23 December, producers under the ordinary regime have the obligation to pay for the utilisation of the transport anddistribution networks. The promulgation of the Law 1/2012 of 27 January, temporarily suspended the remuneration of certain ordinary regime installations andfacilities for special arrangements (applicable to the facilities that, since 28 January 2012, do not fulfill the administrative requirements referred in this standard).TransportationRed Eléctrica de España, S.A. performs the activities of Transmission Manager and System Operator, being responsible for its technical management, to ensure thecontinuity of supply and efficient management of the generation and transmission system. The responsibility for the economic management of the system isguaranteed by OMI - Polo Español, S.A.The entities and qualified consumers have free access to the transmission and supply networks, setting out a system of "tariffs" for traffic. The remuneration for thetransmission and distribution activities is set by the regulatory entity.The Royal Decree 325/2008 of 29 February, establishes a new fee system applicable to electricity transportation facilities, that entered into service from 1 January2009. Just as for distribution, this new model of compensation is based on investments realised.The current text of Law 54/1997 also provides that the transmission activity will be performed by a single entity. There is also a distinction made between the primarytransmission system (facilities> 380 kV with international networks and with extra-peninsular and insular systems) and the secondary transmission system (facilities