Croatia: Electricity price increase impact as result of EU accession; effects on power market development and volatility of prices, will state power utility HEP loose biggest market share against new competitors

27. May 2013. / SEE Energy News

The prices increase after EU accession will happen at energy market also. Electricity price increased by 20% for the last time a year ago and this was justified with HEP’s investments in production capacities, and with electricity import because of the bad hydrology year.

Croatian citizens are expecting the same. Their fear is justified, considering that electricity price increased in 27 EU countries by 6% only in the last three years.

Although, they are careful with forecasts, experts agree with the fact we can expect energy prices increase in long term.

-Electricity price will increase because of two reasons: global requirements for energy will grow what will cause global price growth so investments in energy sector need to be increased.

There are couple of reasons for these forecasts. Some of these reasons are bigger global need for electricity, fossil energy falls and increase of energy from renewable energy sources which price is higher.

-Croatia has lack of produced electricity with reference produced electricity with reference to purchase at the moment. This means that Croatia must continue with import of electricity or modernize production capacities. If it will continues with electricity import, it will depend on prices at open market and they are more likely to increase than decrease in future. If it invests in new capacities, it will have to provide new investment potential and it is possible through electricity price increase- like other EU countries from neighborhood have done. However, investments in new technologies will enable more rational consumption of electricity (for example, electricity network digitalization trend) what means that total consumption will be controlled despite increase of unit price of electricity.

More and more citizens have serious problems with electricity bills at the moment. For example, there were 1197 electricity delivery terminations only in area of Elektrodalmacija Split. Elektra in Sibenik has turned off 463 consumers Zadar has turned 350 consumers off and Dubrovnik 230.

Similar price increases happened in neighborhood after EU accession, in Slovenia, Slovakia and Czech Republic where electricity has increased for two times since EU accession. There are several reasons for electricity price increase, from global oil price increase to slow liberalization of market and privileges of national energy monopolists because of which EU didn’t succeed to make unique electricity market.

-Mentioned markets have different experiences. Only Czech Republic, as transition market, succeeded to transform its national electrical power utility into significant international player. CEZ began its reconstruction program around 10 years ago and it succeeded to expand on different electricity markets like Slovakian, Hungarian or Bulgarian, etc. Of course, the precondition for reconstruction was market prices liberalization. Slovenia is relatively closed market because it is formally liberalized, but real liberalization will be done. Hungary and Poland have liberalized markets what enabled involving foreign players that increased electricity offer, but total consumption can be controlled thanks to the growth of technological possibilities of control.

Solution for cheaper electricity bills can be searched in possible occurrence of new suppliers but they are not enough stimulated at the moment so HEP still holds monopoly unsuccessfully. Croatia, like every other EU member, needs to adjust its law to European and enable electricity market to open this way. This was formally done in 2008 but HEP still doesn’t have competition. Electricity price will remain the same because of current legal orders while new tariff systems are adopted. New orders are not adopted still which is opposite to EU directives that dictate protection of poor consumers among other. This law needs to be adopted until 8 May 2013 the latest but is isn’t still.

There are 14 more suppliers beside HEP today, but there are only 4 of them that together make 1.8% with reference to HEP, mostly because they are not cooperating with households still, but only with business subjects. EU made the Third Energy Package in order to break monopoly of public companies, but HEP still prolongs the procedure of separating transmission from electricity production. Therefore, Croatia is threatened by millions worth fines that would be paid by citizens again.

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