Energy ministry to boost Serbian Energy sector reform and liberalization, Dejan Trifunovic,interview Deputy Minister of Energy speaks about fast forward market plans and new investments in Serbian power gen sector

10. June 2013. / Uncategorized

Energy ministry to boost Serbian Energy sector reform and liberalization, Dejan Trifunovic, Deputy Minister of Energy speaks about fast forward market plans and new investments in Serbian power gen sector

Sustainable energy sector as the main goal

Priorities are reversible HPP “Bistrica”, the second phase of “Kostolac” and negotiations are underway…- Debt obligations must be paid – Strategy should be aligned with the industrial development

The preparation of the new strategy of the energy sector development for the period 2015-2025, with the projections by 2030, is currently in its final stage and it is expected that the first draft will be finished by the end of May, which will be followed by public debate, the adoption by the Government of Serbia and, finally, by the end of this year, it should be approved by the Serbian Parliament  said in the interview for

Magazine Kwh Dejan Trifunovic, Deputy Minister of Energy, Development and Environmental Protection, in charge of Electricity department.

He points out that this will be the first development strategy that will include the environmental impact assessment, as well as the Implementation programme. Trifunovic says that this strategy will take into account all aspects of energy policy, such as regulation, investments, energy efficiency, and renewable energy sources. But, most importantly, it will have a clearly defined time horizon.

What makes the future strategy so important?

It is important because of investments, as the analysis preformed so far has given us a clear picture of future direction. The prevailing principle is that we ensure a sustainable energy sector, compliant with European standards. One of the key goals is to follow EU directives in the field of renewable energy sources and energy efficiency, while a special attention will be given to the respect of directives related to large combustion plants and industrial emissions. The Energy Community will provide us with exact guidelines concerning the decision on the withdrawal of all thermal capacity of less than 300 MW. According to our information, this could happen as early as on January 1, 2018 or as late as by the end of December 2023. This event directly affects the concept of strategy, and decision of EC will apply to all countries member. The Implementation Programme will be completed next year.

We also had many strategies in the past, but almost nothing has been done… Would you tell us something about specific projects?

One of the priority projects is TPP “Kostolac B3” which could be connected to the grid not later than in 2018 or 2019. Some investments depend on the State and EPS, while others are conditioned by financial arrangements. The Strategy also includes some aspects taken from the National Renewable Energy Action Plan, i.e. those related to new 1,092 MW. The strategy will set the priorities. Moreover, alignment of the strategy with the industrial development is of the utmost importance. The concept of a sustainable energy sector must be at the heart of this document, which is to ensure the compliance with norms, in the best interest of both the citizens and business sector. We will lose around 1,150 MW, so we will have to replace them with new capacities and renewable energy plants. The measures of energy efficiency are also envisaged, since we have to save 9% of the final gross consumption by 2018. It is a national commitment.

Is there any chance that some projects will soon be launched?

The priorities are reversible HPP “Bistrica”, the second phase of “Kostolac” and, in that regard, negotiations are underway. As for the hydropower capacities, the most certain projects are the construction of the HPP on Ibar in partnership with the Italians and the construction of small hydropower plants, financed from the European Bank for Reconstruction and Development loans. TENT B3 and “Kolubara B” have been taken into consideration as well. There is also an interest in TPP “Stavalj” and Despotovac, although these facilities are not within the system of EPS. “Djerdap 3” is regarded as a serious project. There is a shortage of electricity in the region and it is projected that in 10 years Serbia will extend its capacities by 2,000 MW plus 1,092 MW from renewable sources.

The amendments to the Energy Law have been announced. What areas will be subject to changes?

At the end of the year the amendments were made in order to resolve the issue of energy permitting, and now our efforts are directed towards several areas. Irrationalities that have hindered the implementation of the Law in the previous period are detected, and will be corrected as soon as possible. As regards the electricity sector, there will be changes in parts of legislation related to energy permits, grid connections, deadlines and industrial networks that have not been included so far. We will also broaden the scope of authority of the Energy Agency. We will amend everything that has blocked the practical application; in the areas of oil, gas and the heat, too. The implementation of the Third package of EU measures will be a part of the process that will last until the end of the year. This package is very important because it regulates several issues and defines more precisely three stages of liberalization.

Is there any change in the liberalization agenda?

There is no change of the time schedule. We are to define more precisely the policy of electricity pricing which will be applied as of January 1, 2015, i.e. whether we will keep both categories of electricity prices (market and regulated) or we will exclusively opt for the market price. By the adoption of the Decree on vulnerable customers, we have addressed the issue of most vulnerable groups, which was a part of the Third package. The separation of activities envisaged by the Law will be completed until the end of the year and EPS will have a Public supplier and, depending on the concept, one or five Distribution system operator(s). According to the existing Energy Law from 2011, we have implemented the Second EU package.

To what extent is the Ministry of Energy involved in solving accumulated problems of EPS?

At joint meetings we are discussing the most important issues faced by EPS where the Ministry of Energy can provide help, either directly or through other ministries, and this concerns both the regulation and specific problems. We have addressed all the issues, and there are already some solutions on the horizon. The most important thing is that the liquidity problems have been resolved by two rounds of debt rescheduling, so that EPS slowly recovers from a troublesome situation. EPS has signed 115,000 agreements, out of which 12,500 with the industrial sector. The effect is about 10%, but given the collectability of debts, the real effect would be over 30%. The things still don’t look very bright, but at least we have RSD 8 billion of debt rescheduled. Moreover, agreements with banks were concluded in order to bridge financial gaps and incentives were introduced regarding public revenues, as well as maturing debt obligations toward Paris and London clubs. We are waiting the enactment of the Law of Public Debt that will enable solving the problems of debtors such as police departments, judicial and medical institutions…

The electricity cut offs to larger debtors somehow came as a surprise to many people….

The action of electricity cut offs was clearly announced. We made a plan and determined dynamics. Cut offs have been performed on the non-selective basis, and it was agreed to begin with the large debtors who have never had their electricity cut off. In collaboration with the Ministry of Economy and Finance we made a list of 270 companies in restructuring which have debts for unpaid electricity. Debt obligations must be paid. A debtor who has not signed debt rescheduling agreement will be first exposed, but, however, there is still a room for making an agreement. As the deadline is prolonged for additional 30 days, the debtor has one more chance to settle the debt in 4 installments. No one will be protected.

What to do if some of 270 companies in the restructuring again fail to pay their debts?

At the moment, we may see which companies have signed rescheduling agreement and which ones haven’t yet done so. Once a serious analysis has been performed, we will be able to determine which companies are strategically important and have specific activities. This will be the criteria according to which we will tolerate debts for additional one or two months. It’s time to put things in order, because continuing with old practice could seriously jeopardize the system functioning.

What other changes could be expected?

As all necessary opinions from the Government of Serbia have been provided, the Supervisory Board of EPS will soon be established in accordance with the Law on Public Companies. Besides, we have received from the Government the guidelines for the selection of the Chief Executive Officer of EPS, and job competition is expected to be publicly announced, according to the Law, by June, 30. Also, everything is ready for the implementation of the Decision on assigning the role of public supplier. It is likely that the company “EPS Supply” will start its operations in June, which would create conditions for the correction of electricity price. Given that the State has entrusted the role of public supplier to EPS, it is essential to solve all the issues related to five service providers as soon as possible in order to enable price adjustment. In the upcoming period, we are going to discuss the results achieved in the fields of cost reduction and systematization and classification of job positions and analyze whether some progress in streamlining operations has already been made.

Is the transformation of EPS in a joint stock company the right solution?

We faced a big dilemma regarding the decision whether to immediately transform EPS into the joint stock company, but we still have decided to wait until the autumn so that the transition could be carried out in accordance with the requirements prescribed by the Law on Public Companies. We don’t lose anything with this delay; by contrast, we could only benefit from introducing good principles from the Law. The transition to a joint stock company, which will imply a clear definition of business functions (i.e. producer, public supplier, and distribution system operator), is to be expected in the autumn. “Elektromreza Srbije” will also be transformed in a joint stock company until the end of the year.

Following the decision to adjoin “Kolubara Metal” back to MB “Kolubara”, the issue of other formerly separated companies has also become relevant. How to resolve their status?

The process of reintegration of “Kolubara Metal”, which will soon be accomplished, is a completely different story compared to all other previously separated companies. The separation of “Kolubara Metal” was wrong decision from the start, but this wasn’t the case with other 25 companies. We want this merger to be carried out in an effective, rational manner and not to be a question of a mere combination. We also received the initiative of “Prim Kostolac”. We will discuss this matter. It is important to bear in mind that each company is different, so there will not be a chain reaction. But in the case of “Prim” there are elements to be considered. Anyway, apart from the activities related to EPS, the separated companies will be engaged as soon as the projects of the construction of wind farms start, and thereby they will have the opportunity to make profit.

The progress is visible

The negotiations between Belgrade and Pristina on the issue of energy have started. Is there any progress?

A great step forward was made, and solutions are expected by June, 15. For the first time all parties are willing to reconsider their positions, the authorities in Pristina has agreed to negotiate and EU officials have changed their opinions. We have introduced some issues such as the rights of workers of EPS, and we should get DSO for Northern Kosovo, which is important for ensuring electricity supply in those nine municipalities. We have also tackled the issue of licensing, but it is too early to talk about specific results.

Source; Kwh

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