Republic of Lithuania                                     
                                 LAW                                            
                                  ON                                            
                                ENERGY                                          
                                                                                
                                                                                
                                                                                
                              Chapter I                                         
                          GENERAL PROVISIONS                                    
                                                                                
     Article 1. Terms and Definitions                                           
     As used in this Law:                                                       
     energy means a section of economy which embraces prospecting               
for,  extraction, transportation and storage of energy resources,               
generation, transformation, distribution, transmission, trade  in               
and consumption of different types of energy;                                   
     energy system means the entire complex of energy enterprises               
(companies)   connected  by  technical,  organisational   or(and)               
economic links and functions of the mode of operation;                          
      energy  sector means the energy section connected with  any               
type of energy resources or energy: fuel, electricity, heat;                    
      primary energy resources means natural resources which  may               
be directly used for fuel (shale, coal, peat, biomas, combustible               
gas)  or  for the generation of energy (nuclear fuel,  petroleum,               
hydroenergy, solar energy, wind energy or geothermal energy);                   
     renewable energy resources means natural renewable resources               
or  natural  resources which can be renewed, such as hydroenergy,               
wood, biomas which may be used for energy purposes;                             
      secondary  energy resources means waste energy obtained  in               
the course of any technological process through transformation of               
primary  or  any  other  energy which is  not  utilised  in  this               
technological process;                                                          
      energy efficiency means generation and consumption  of  all               
types of energy and its consumption in the most advanced manner;                
      energy  enterprise  means an economically  and  juridically               
legalised  independent economic entity whose principal purpose(s)               
is(are) energy activities;                                                      
      energy  activities means activities related to  prospecting               
for,   extraction,   transportation,   distribution   of   energy               
resources, generation, transmission of energy, trade in energy or               
operation of power-generating equipment;                                        
      standards  and  norms of energy means  static  and  dynamic               
technical characteristics of facilities, products, structures and               
equipment  used in energy activities which have been approved  in               
the  established manner, as well as specifications regulating the               
quality of energy and energy raw materials.                                     
                                                                                
     Article 2. Purpose of the Law on Energy                                    
      The  Law on Energy defines the general provisions of energy               
activities,   the   basic  principles  of   energy   development,               
functioning and management. Activities of individual  sectors  of               
energy,  of  state,  municipal  and private  energy  enterprises,               
energy  producers,  suppliers  and  consumers,  their  legal  and               
economic  relations when the object thereof is energy  or  energy               
resources,  shall  be  regulated by other  laws  and  subordinate               
legislation.                                                                    
                                                                                
     Article 3. Goals of Energy Policy                                          
      The  principal  goals  of the State energy  policy  are  as               
follows:                                                                        
     1) saving of energy;                                                       
     2) efficient consumption of primary energy resources;                      
      3)  reduction  of  comparative energy consumption  for  the               
production of the national product;                                             
      4)  targeted efforts towards and guaranteeing  of  reliable               
supply  of energy resources by using various resources, including               
indigenous  resources, by diversification of fuel import  sources               
taking  into  account  the  necessity  of  demonopolisation   and               
decentralisation;                                                               
      5)  promotion of efficient use of indigenous, renewable and               
secondary energy resources by the producers and consumers;                      
      6) reliable, good-quality and cost-effective production and               
supply of electricity, heat and fuel from energy sectors;                       
       7)   reduction  of  adverse  effects  of  energy  on   the               
environment;                                                                    
     8) formation of legal and economic conditions favourable for               
investments;                                                                    
       9)   promotion   of   competition  and   private   capital               
participation in order to increase economic efficiency.                         
                                                                                
                                                                                
                           Chapter II                                           
                     USE OF ENERGY RESOURCES                                    
                                                                                
     Article 4. Basic Provisions of the Use of Energy Resources                 
      The  procedure for the use of energy resources  and  energy               
consumption  shall be approved by the Government of the  Republic               
of Lithuania.                                                                   
      Relations  between the recipients of energy  resources  and               
energy  producers,  consumers and suppliers  shall  be  based  on               
contracts.                                                                      
      Extraction  of  energy resources and energy production  and               
consumption shall be subjected to State supervision.                            
                                                                                
       Article   5. Procedure  for  Approving   Subordinate                     
          Legislation Regulating Energy Activities                              
      Subordinate legislation regulating energy activities  shall               
be  approved  by the Government of the Republic of  Lithuania  or               
other  institutions in accordance with the procedure  established               
by the Government.                                                              
       In   addition  to  this  Law,  enterprises,  institutions,               
organisations  and  residents (energy  producers,  suppliers  and               
consumers)   must   also   comply  with   other   standard   acts               
(installation, operation, labour safety, personnel  training  and               
performance   evaluation  regulations,   etc.)   which   regulate               
technical,  operational and other energy -related  issues.  These               
standard  acts  shall be approved by the Ministry  of  Energy  or               
other   state  institutions  of  Lithuania  according  to   their               
respective competence.                                                          
                                                                                
     Article 6. Energy Saving Fund                                              
      Energy  Saving Fund is set up for the purpose of  efficient               
implementation  of  measures for the supply of energy  resources,               
energy production and consumption.                                              
      The  capital of the Fund shall be used for financing energy               
saving   and   efficient   consumption   programmes,   for    the               
introduction, operation and development of measures for  the  use               
of indigenous, renewable and secondary energy resources.                        
      The Government of the Republic of Lithuania shall determine               
the  initial contribution to the Fund and approve the regulations               
of the Fund.                                                                    
                                                                                
     Article 7. Energy and Environmental Protection                             
       Energy   activities  shall  be  regulated   by   laws   on               
environmental protection, subordinate legislation, other standard               
documents,  taking  into account the requirements  set  forth  in               
international agreements (conventions) on environmental issues.                 
      It shall be prohibited to initiate energy activities if the               
activities   are  not  in  compliance  with  the   Law   on   the               
Environmental  Protection, standards and norms  of  environmental               
protection.                                                                     
                                                                                
     Article 8. Rights and Duties of Energy Consumers                           
      Energy  consumers shall use energy in compliance  with  the               
standard documents approved by the Government of the Republic  of               
Lithuania.                                                                      
     The rights of energy consumers shall be protected by the Law               
on  Consumer  Protection and other legal acts of the Republic  of               
Lithuania.                                                                      
                                                                                
                                                                                
                           Chapter III                                          
                 ENERGY STRATEGY AND INVESTMENTS                                
                                                                                
     Article 9. Shaping of the National Energy Strategy                         
      The  aim  of the National Energy Strategy is to define  the               
purposes of energy development, the most important principles  of               
its  management, taking into account the development  of  economy               
under market conditions.                                                        
      The  National  Energy Strategy shall  cover  the  following               
sectors:                                                                        
     1) electric energy sector;                                                 
     2) thermal energy sector;                                                  
     3) gas sector;                                                             
     4) petroleum and its products sector;                                      
     5) other fuels sector.                                                     
     The National Energy Strategy shall be worked out for no less               
than 20-year period and shall be revised at least every 5 years.                
      Development of the National Energy Strategy may be financed               
with the State funds. The Ministry of Energy shall be responsible               
for the development of the Strategy.                                            
     The National Energy Strategy shall be approved by the Seimas               
on the proposal of the Government of the Republic of Lithuania.                 
     Long-term energy development projects shall be worked out in               
compliance with the National Energy Strategy.                                   
      Long-term  energy  development projects  must  be  prepared               
taking   into   account  the  possibility  of  implementing   the               
demonopolisation principle and using decentralised energy sources               
and  small-scale energy. The procedure of project development and               
approval shall be established by the Ministry of Energy.                        
                                                                                
     Article 10. Investments                                                    
     Energy facilities of national significance shall be built in               
accordance  with  the  National  Energy  Strategy.  They  may  be               
financed from various sources on a competitive basis. The  amount               
of State capital must guarantee that controlling interest is held               
by the State.                                                                   
      Financing of municipal and other energy facilities of local               
significance,  as well as development of energy activities  shall               
be   the   concern  of  city  (district)  municipalities,  energy               
suppliers or(and) consumers, private investors.                                 
                                                                                
     Article 11. Fuel Reserves                                                  
      In  order  to  increase reliability of energy supply,  fuel               
reserves shall be accumulated at energy enterprises. The reserves               
must  be  no less than the amount of fuel required to satisfy  2-               
month energy demand.                                                            
      The  procedure  for  the  building  up,  storage,  use  and               
accounting  of  State fuel reserves shall be  determined  by  the               
Government of the Republic of Lithuania. The Ministry  of  Energy               
shall  be  responsible for the building up and use of State  fuel               
reserves.                                                                       
      The  Government of the Republic of Lithuania shall allocate               
funds for the building up and storage of State fuel reserves.                   
     Energy producers must have reserve or emergency fuel, taking               
into account the significance of the facility.                                  
                                                                                
     Article 12. Use of Renewable and Secondary Energy Resources                
     By shaping taxation policy, granting soft credits, extending               
grants, the State (municipality) shall promote efficient  use  of               
renewable and secondary energy resources.                                       
      The Ministry of Energy shall be responsible for the use  of               
renewable and secondary energy resources.                                       
      At  the  request  of  consumers who  use  renewable  energy               
resources, surplus energy generated by their autonomous equipment               
must  be  received  into the energy networks  and  settlement  of               
accounts  with such consumers shall be effected on  a  negotiated               
price and tariff basis. The procedure and terms and conditions of               
their  connection to the energy networks shall be established  by               
the Ministry of Energy.                                                         
     Credits shall be extended in order to implement measures for               
ensuring  efficient  use of indigenous, renewable  and  secondary               
energy resources. The procedure of credit extension and repayment               
shall  be  established  by  the Government  of  the  Republic  of               
Lithuania.                                                                      
      The  use of potential energy of internal waters, when  this               
entails  damming of the river or changing the river bed,  and  of               
geothermal  energy  shall be permitted only  upon  receipt  of  a               
licence  issued  in accordance with the procedure established  by               
the Government of the Republic of Lithuania.                                    
                                                                                
                                                                                
                           Chapter IV                                           
                 PRINCIPLES OF ENERGY MANAGEMENT                                
                                                                                
     Article 13. Ownership                                                      
      All  primary  energy resources found in  Lithuania  in  the               
underground  of  the earth and in the continental  shelf  of  the               
Baltic  Sea  are exclusive property of the State. They  shall  be               
used  under  licences issued pursuant to the procedure prescribed               
by the Government of the Republic of Lithuania.                                 
      Energy enterprises (companies) may be of any ownership form               
permitted  under law, except for energy enterprises  of  national               
significance the list whereof shall be approved by the Seimas  of               
the Republic of Lithuania on the proposal of the Government.                    
     State-owned and private energy enterprises and facilities as               
well  as  joint  ventures and energy enterprises  and  facilities               
owned  by  foreign states may be set up in the territory  of  the               
Republic  of  Lithuania.  The  terms  and  conditions  of   their               
existence in the territory of the Republic of Lithuania shall  be               
regulated by the Government of the Republic of Lithuania  on  the               
basis of the Constitution of the Republic of Lithuania, this  Law               
and other laws in effect in the Republic of Lithuania, as well as               
agreements between states.                                                      
      Setting up, sale or transfer of energy enterprises as  well               
as  granting of licences for the use of energy resources to legal               
or  natural persons of foreign states shall be prohibited if this               
may  be detrimental to the interests of the Republic of Lithuania               
or  increases  its dependence on the energy monopoly  of  foreign               
states.                                                                         
                                                                                
     Article 14. Allotment of Land for Use and Land Lease                       
      For the construction and extension of energy generation and               
transmission facilities, construction of electric power lines and               
pipelines, land shall be allotted for use or leased in accordance               
with   the   procedure  established  by  laws   and   subordinate               
legislation.                                                                    
      Restricted  area shall be established for  the  purpose  of               
ensuring  security  and  normal operation of  energy  facilities,               
electric power lines and pipelines, and other installations.  The               
land  of restricted area shall not be taken from the land  owners               
and other land users and its practical use shall be restricted.                 
       Regulations  for  the  protection  of  energy  facilities,               
electric  power  lines and pipelines shall  be  approved  by  the               
Government of the Republic of Lithuania.                                        
      Specific  conditions of land use restriction and amount  of               
compensation for possible damage incurred by reason thereof shall               
be  recorded in an written notarised agreement concluded  between               
the   owner  or  other  user  of  land  and  the  energy   system               
(enterprise).  Agreements between land owners and energy  systems               
(enterprises)  regarding the use of land shall  become  effective               
upon  the registration thereof in the Data Register of the  State               
Land   Cadastre.  Land  use  restrictions  prescribed  by   these               
agreements  must  be in compliance with the regulations  for  the               
protection  of  energy  facilities,  electric  power  lines   and               
pipelines.                                                                      
                                                                                
       Article  15.  Prices,  Pricing  and  Control  over  Energy               
          Activities                                                            
       Fuel  prices  and  energy  tariffs  shall  be  fixed  upon               
evaluating necessary expenses related to fuel extraction,  energy               
generation,  purchase, and transportation as well as  development               
of  energy. Prices and tariffs must correspond to the quality  of               
energy,  promote efficient energy generation, its  good  quality,               
reliable  supply, economical consumption and reduction of  supply               
losses as well as the use of secondary energy resources.                        
      Electric  and thermal energy as well as natural gas  prices               
and  tariffs may be differentiated according to consumer  groups,               
energy quality, reliability of supply, time of consumption  (day,               
week, season) and the amount of energy consumed.                                
     The issues of pricing in the energy sector shall be examined               
by  the standing State Commission for the Control over Prices  of               
Energy Resources and Energy Activities.                                         
      The Commission shall be appointed for a term of 5 years  on               
the  nomination  of the Government and its regulations  shall  be               
approved by the President of the Republic.                                      
      The  Commission shall examine the most important issues  of               
energy  economy, including investments, establish the  principles               
of  pricing  in  the energy sector and the rules  for  price  and               
tariff  calculation, shall check and approve the  calculation  of               
electric  energy,  thermal  energy and  natural  gas  prices  and               
tariffs,  submit the electric energy, thermal energy and  natural               
gas  prices  and  tariffs to the Government of  the  Republic  of               
Lithuania  for  approval,  supervise their  application  and  the               
implementation of the saving programme. The Commission shall have               
the  right  to  check  the  energy  quality,  its  conformity  to               
standards,  and  shall  exercise control  over  trade  in  energy               
resources  and energy products. The Commission shall  submit  its               
findings  and  proposals to the Seimas,  the  Government  of  the               
Republic  of  Lithuania and, in the event  of  disclosure  of  an               
offence, to the prosecutor's office.                                            
      On  the  decision  of the Government  of  the  Republic  of               
Lithuania or a municipal council, compensations may be  paid  out               
from  the  State or municipal budgets to certain consumer  groups               
for the purchased fuel, electric and thermal energy.                            
     Fuel prices and energy tariffs of facilities that are within               
the  sphere  of  regulation of municipalities  may  be  fixed  by               
municipalities. Prices and tariffs for consumers that are  within               
the  sphere  of municipal regulation shall become effective  only               
upon  co-ordination  thereof with the State  Commission  for  the               
Control over Prices of Energy Resources and Energy Activities and               
upon  the  approval thereof by the Government of the Republic  of               
Lithuania.                                                                      
                                                                                
                            Chapter V                                           
                 PRINCIPLES OF ENERGY MANAGEMENT                                
                                                                                
     Article 16. Energy Management                                              
      Energy  activities shall be regulated by  the  Ministry  of               
Energy  and other institutions of the Republic of Lithuania.  The               
Ministry of Energy shall represent State interests in the  sphere               
of  energy,  implement  State energy  policy  goals  and  act  in               
compliance with the regulations approved by the Government.                     
      The  Energy Agency shall work out draft programmes  of  the               
National Energy Strategy and of economical and efficient  use  of               
energy  resources, organise their implementation,  devise  legal,               
economic  and  organisational measures for the implementation  of               
national policy of efficient energy use as well as draft laws and               
subordinate legislation regarding the issues.                                   
      The Energy Agency is a State enterprise. Its founder is the               
Ministry of Energy.                                                             
                                                                                
     Article 17. Energy Licences                                                
       A  licence  shall  be  required  for  engaging  in  energy               
activities.                                                                     
       The  procedure  for  issuing  energy  licences  shall   be               
established by the Government of the Republic of Lithuania.                     
                                                                                
      Article  18.  Energy  Sectors and  Peculiarities  of  their               
          Activities                                                            
      The Republic of Lithuania has the following energy sectors:               
electric  energy,  thermal energy, gas,  and  petroleum  and  its               
products sectors.                                                               
      Electric  power plants operating within the general  energy               
system shall work under unified conditions of operation and  must               
comply with operational control. The above-mentioned requirements               
shall   be   mandatory   to   repairs  and  construction-assembly               
enterprises  as  well as other enterprises the main  function  of               
which  is to maintain and ensure normal operation of the electric               
power system.                                                                   
     The energy system may be connected to foreign state electric               
power systems for operation in parallel mode on contractual basis               
and shall be under joint operational control of energy systems in               
accordance  with  the functions regulated by  agreements  between               
states.                                                                         
      When the pipelines are connected to foreign state networks,               
the  sectors  of  gas, petroleum and its products  shall  operate               
under joint co-ordinated control in accordance with the functions               
regulated under agreements between states.                                      
                                                                                
      Article  19.  Training of the Energy Sector  Personnel  and               
          their Performance Evaluation                                          
      Executives and specialists of energy enterprises engaged in               
energy  sector production operations must have special  training.               
Energy  enterprises shall prepare and train the personnel at  the               
educational institutions supported by these enterprises.                        
      The  personnel of energy enterprises specified  in  Par.  1               
hereof  must  from  time  to  time be  subjected  to  performance               
evaluation.                                                                     
      The  personnel engaged in the operation of power-generating               
equipment  must have adequate qualifications and be subjected  to               
performance evaluation.                                                         
      The  procedure for training and performance  evaluation  of               
energy  specialists  shall  be established  by  the  Ministry  of               
Energy.                                                                         
                                                                                
                           Chapter VI                                           
         STATE SUPERVISION OF ENERGY AND RESPONSIBILITY                         
                   FOR VIOLATIONS OF THIS LAW                                   
                                                                                
     Article 20. State Supervision of Energy                                    
      State  supervision of energy shall be carried  out  by  the               
State  Energy Inspectorate at the Ministry of Energy (Amended  28               
March 1996).                                                                    
      State  supervision of power-generating equipment of natural               
and legal persons (according to the list approved by the Ministry               
of  Energy)  shall  be exercised on the whole  territory  of  the               
country  irrespective  of  the official subordination,  forms  of               
ownership   and  capacity  of  power-generating  equipment.   The               
Inspectorate  shall not exercise state supervision  over  nuclear               
power equipment.                                                                
      The  main  purpose of the Inspecorate is to exercise  state               
supervision  and  control  over  power-generating  equipment   of               
natural  and legal persons of the Republic of Lithuania in  order               
to  ensure  reliable, efficient and secure supply and consumption               
of energy resources.                                                            
                                                                                
      Article  21. Responsibility for Violations of  the  Law  on               
          Energy                                                                
      Legal  and natural persons who violate the requirements  of               
this Law shall be held responsible under the laws of the Republic               
of Lithuania.                                                                   
                                                                                
                           Chapter VII                                          
                    INTERNATIONAL ACTIVITIES                                    
                                                                                
     Article 22. International Activities                                       
      International activities in the sphere of energy  shall  be               
developed in the interests of the Republic of Lithuania.                        
      International  activities of energy systems  (enterprises),               
institutions  and  organisations shall  be  co-ordinated  by  the               
Ministry of Energy.                                                             
      The  Ministry  of  Energy  shall submit  proposals  to  the               
Government  of the Republic of Lithuania in accordance  with  the               
established  procedure regarding participation  in  the  work  of               
international energy organisations.                                             
      I  promulgate this Law passed by the Seimas of the Republic               
of Lithuania.                                                                   
                                                                                
Algirdas Brazauskas                                                             
President of the Republic                                                       
                                                                                
Vilnius                                                                         
28 March 1995                                                                   
No. I-828                                                                       
(As amended by 28 March 1996)