Croatia: Gas Distributors not Ready for Final Market Liberalization

12. April 2016. / SEE Energy News

The number of gas distributors is still above-average for such small market, their technical capacity and level of knowledge about planning is low so the majority is still struggling with balancing energy.

In 14 European countries, gas prices are regulated, and it is the same in Croatia. However, government seems to have been self-absorbed so they waited for the heating season to be over in order to drastically reduce the price of gas for households. This served INA and HEP well. Next spring, the market should become fully opened…

In Europe, gas prices have been dropping since 2014, and the import price of gas has dropped by 40% only within the last year. Oil prices have strongly accelerated this process so, within the last month only, the price of gas on the market has dropped by almost 8.5%. In Europe, gas is currently traded at unprecedentedly low prices – there is an abundance of goods, and the demand is stagnating because Europe has not emerged from the economic crisis. Such situation has enabled very good profits for gas traders because, although lower with respect to the period before the beginning of liberalization of this segment, the prices for end-consumers have not dropped so drastically. This is not the situation only in our country, all around Europe, end-buyers have not felt radically the benefits of cheap gas. It is similar to the situation with the prices of oil derivatives, where traders’ margins have grown by 30 to 40% owing to cheaper goods. In 14 European countries, gas prices are regulated, and it is the same in our country. However, our government seems to have been self-absorbed so they waited for the heating season to be over in order to drastically reduce the price of gas for households. This went in favor of Ina (which sells domestic gas, but which is managed by MOL in their own interest, and not in the interest of the state) and HEP, which was making a fine margin while reselling domestic gas to suppliers. Whereas the prices of gas on the market ranged around 14 euros per MWh this winter, Ina was selling its gas at a price higher than 17 euros per MWh. Considering the differences in the specifics of these two gases, Ina’s profit was even higher than four euros per MWh so Ina had nothing to complain about then, as it has nothing to complain about now, because it is still selling gas above the market price. However, the additional profit from gas has so far helped HEP amortize the loss of 15% of electricity market. It is cozy to also have a dominant role in the gas storage, which provides a comfortable position during the supply of gas for own needs, too. Nevertheless, now, with the new prices, something has changed, HEP’s margin will be significantly lower, but for the time being, they remain with their storage capacities by which they can balance the market, but their own consumption, too. It is only next autumn and winter that people will benefit more significantly from the decreased price of gas, provided that such method of price formation is maintained. Anyway, the process of market opening for households should start next year, in spring 2017. Is the time ripe for this? Are Croatian suppliers and distributors capable of responding to the technical aspects of this process? The informed are shaking their heads.

In our country, the number of gas distributors is still above-average for such small market, their technical capacity and level of knowledge about planning is low so the majority is still struggling with balancing energy. The system is balanced by the balance group leaders (BGL) who send their consumption estimates to Plinacro. Plinacro determines a positive or negative deviation in consumption, and this on daily basis, so it makes out invoices for this to BGLs once a month. BGLs are constantly complaining that this system is not functioning efficiently because of the lack of measuring data in the distribution system, and that they incur penalties through no fault of theirs. Whereas HERA stresses the importance of good planning, BGLs warn that there is no such algorithm that can replace measurement and that, until the measurement system is resolved, they have no tools for market behavior, because they cannot balance their consumers on their own on daily basis. So this is the current state of affairs, the state in which there are no standard consumption profiles, which the suppliers themselves should make for their buyers, and by which many things would be improved during allocation. When small consumers enter this equation, even greater chaos will be created. Here, HERA should enter the scene as soon as possible and arrange things, because the rules which have been literally copied from the EU and transposed into our legislation are not applicable on such small market and for such small consumption. This chronic issue has not been worked upon in the last year or two, the same as, for two years, the Ministry of Economy has been ignoring the protest from Brussels because they legally banned Ina from exporting gas. Indeed, this was done in the interest of citizens, but it could have been done in a much softer way, by discouraging Ina from exporting gas, and not by legally banning this and – damn the consequences! In this way, in a few months, the state could be faced with legal proceedings which will mean high daily financial penalties and ultimately, a lost battle. So, in our country, it seems that the market will be opened with a big bang, which is not good. It would be better if this process was going in a well-conceived and gradual manner, when we want it and when we are really capable of carrying it out properly, in the interest of all market participants, transmits Serbia-energy.eu

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