Big electricity consumers in Serbia expecting new market framework

24. December 2012. / News Serbia Energy

The Energy Agency has not determined all market rules yet, so that large consumers cannot choose their suppliers of electricity.

Pursuant to the Energy Law, the large customers, factories, companies, heating plants, which consume a lot of electricity in their operational processes, shall be entitled to choose their suppliers of kilowatt-hours in a free market аs of 1st January 2013.  However, due to a lack of bylaws, which are mandatory for all electricity market participants, the industry is likely to continue to buy energy exclusively from EPS, even in the period following the New Year holiday.  Except that this public enterprise will not sell them electricity at controlled, but at higher, market prices.

In order to ensure a regular electricity supply, the large consumers, including 27 companies (“Azotara Pancevo”, “Lafarge”, “Zelezara Smederevo”, “Valjaonica bakra”…), should conclude an agreement with suppliers by the end of the year. This is impossible for the moment, because, although the New Year is coming in two weeks, the Energy Agency hasn’t adopted the final version of the proposed market rules (market code)— which was confirmed by the well-informed source of “Politika”.

The “Market Code” prescribes cost of the so-called “balancing”, i.e. expenses incurred as a result of possible deviations from the planned delivery of electricity. For instance, if some large consumer ordered certain amount of electricity which is to be delivered in January, and in the meantime, realized they need more or less than the ordered amount, a supplier has to include in the calculation the cost of deviation from the original order as some kind of penalty.  In the market without competition, the state-owned Electric power industry is free to continue exercising the monopoly, as well as to increase electricity prices for industrial consumers.
Since price list (balancing) has not been determined yet, a large industrial consumer cannot calculate its full costs of electricity. Therefore, in this moment only EPS is able to offer energy to end consumers, which undermines level playing field in the market.
According to the source of “Politika”, “Elektromreza Srbije” submitted the proposed market rules (market code) to the Energy agency on several occasions throughout this year.

The Energy Agency confirms that the “market code” determining the costs of balancing will be adopted by the end of the year. Also, pursuant to the Government’s order, EPS can continue to provide the large industrial consumers with the reserve supply until February 2013, but they are required to choose their future supplier by March, when the commitments of EPS cease to exist.

We have unofficial information that the large industrial consumers have already sent a letter to the Ministry of Energy, stating that the price offered by EPS is too high, and that they could hardly manage to pay such price, given that even with the current price they have been experiencing difficulty in paying off their electricity debts. EPS denies having imposed such a high price to anyone, claiming that it was the only bidder at the tender launched by “Beogradske elektrane”, the company responsible for electricity supply. They also explained that the same price could not be offered to all large consumers, given the differences in their levels of electricity consumption, as well as in costs of ‘demand’, i.e. the annual sum of monthly maximum active powers, which is also included in the calculation.

Zorana Mihajlović, the Minister of Energy, confirmed to “Politika” that the increase in electricity prices was conceived as a process that would progress gradually.

— It is sure that there will be an increase in electricity prices for large customers, but the state and the Ministry of Energy have no interest in closing down the industry, especially not those companies that regularly pay their electricity bills and which are the drivers of industrial development, said Mihajlović.

The largest debtors within the group of 20 high-voltage consumers, including “RTB Bor”, “HIP Pancevo” and “Kragujevac Zastava”, will certainly face the most serious problems, because their debt obligations amount to about RSD 10 billion.

Source Serbia Energy Magazine

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