Albania: Electricity traders complaint for KESH-OSHE electricity purchase deal dismissed by Competition Authority

, SEE Energy News

Competition Authority has approved deal between electricity distributor OSHE and energy company KESH for agreement for the sale of surplus electricity from KESH to OSHE to cover grid losses of OSHE.

According to the competition authority CA statement, agreement were reviewed by the CA after complaints which came from association of Albanian Electricity suppliers who claimed that the bilateral agreement signed between KESH and OSHE restrict competition and participation of electricity trading companies licensed by ERE energy regulator.

Competition Authority, after receiving the complaint AAES association, addressed KESH, OSHEE and Energy Regulatory Entity (ERE) in connection with the agreement signed between KESH and OSHEE, with goal to clarify whether this agreement meets the exclusion referred to the Law “On Protection of Competition”.

KESH and OSHEE, on 6 February 2015, signed an “Agreement for the sale and purchase of electricity between KESH and OSHEE for the electricity surpluses including redundancies in HPPs, in order to meet the losses in the distribution network for 2015 “.

The agreement object was the sale and purchase / supply of electricity surpluses to cover the partial or complete loss of the distribution network for 2015, according to the definitions given in the Albanian Electricity Market Model, Rules of Sale of Electricity.

Despite the fact that agreement includes corresponding period of 2015, in fact is an agreement which can be effective only for a short period this year. The fact is that it is conditional on the sale of electricity to cover losses distribution network only in the situation of surplus electricity, including those in HPPs , when KESH’s needs to avoid spilling of water without electricity output.

The agreement signed between KESH and OSHEE defines the procedures and modalities of communication and determination of the application by OSHEE to KESH for electricity to cover losses in the distribution network, before starting the bid procedure of KESH to traders.

OSHE Operator Electricity Distribution is the only operator with a natural monopoly position in both segments of the electricity market. It operates on the distribution market segment and the retail segment of the public supply. Due to technical and non-technical losses of the distribution network, and the security of electricity supply only OSHE is allowed to perform the purchase of electricity to cover losses in the distribution network.

So in this market segment OSHEE is acting alone. As a result, the market is quite complex. Regarding the replacement of the supply side in this market segment there are 66 operators licensed for electricity trading.

So the market from the supply side can be flexible, but in reality there are only 5-6 traders which are active in the process of sale of electricity to OSHE for covering losses.

KESH has natural monopoly position in two market segments in the market of production / power generation market and the wholesale supply. KESH Gen is a public operator who is licensed to produce electricity. KESH Gen’s is a public producer of electricity in full state owned ownership.

Competition Authority argued the reasons for supporting the deal OSHE-KESH

1) The agreement contributes to national security and social problems arising in cases of discharges and flooding in the respective areas.

2) The agreement contributes to maximum utilization and optimization of the production and sale of electricity from KESH, as a responsible company and management of the Drin River Cascade and its HPP manufacturing yields, in terms of surplus or large flows, emergencies, when sales in the export market is impossible as a result of limited interconnection capacity.

3) The Agreement provides discounts costs for tariff customers, because it guarantees the supply part of the distribution network losses from electricity produced by KESH in terms of balance and large inflows, as it has met the demand of OSHE, priced lower than the import price of electricity, based on the evidence and the available historical data.

4) Deal brings substantial benefits to consumers tariff, taking in consideration that insurance costs through the purchase, the electricity to cover losses in the distribution network are included in the retail supply tariffs for tariff customers.

5) So this agreement is to benefit the public interest and market efficiency, in the case Large inflows.

6) The agreement will apply until the end of 2015, in the case of large flows in HPPs. , transmits