Montenegro, The price of electricity in the coming year is affected by a series of decisions

, SEE Energy News

The system operators, CGES and CEDIS, are exposed to costs for the purchase of electrical energy to cover losses

The price of electricity in the coming year is affected by a series of decisions, and for almost half of the bills for consumed electricity, the decision is made by Elektroprivreda independently, in the role of supplier, the Regulatory Agency for Energy and Regulated Utilities (REGAGEN) announced.

The representatives of the regulator explained that the amount of the items on the account related to the use of the system and the work of the electricity market operator is determined by REGAGEN based on the requests submitted by the regulated companies – Montenegrin Elektroprenosni System (CGES), Montenegrin Elektrodistributivni System (CEDIS) and Montenegrin Electricity Market Operator (COTEE).

“Those companies submitted to REGAGEN within the deadline, i.e. on August 31, requests to determine income for the following year, 2024 and 2025.” The requests in their entirety, with all required items, are available to the public from the very beginning of the procedure. So, for almost two months, companies’ requests can be accessed via the REGAGEN website, which has been in operation all this time”, representatives of the regulator told the Mina-business agency.

Publicly available data indicates that CGES requested an annual income of 32 million euros on average, which is about six percent more than the income that REGAGEN granted to the company for this year.

“While CEDIS demanded an average income of 112 million euros, which is about 36 percent more than the income granted to that company for this year, COTEE demanded about one million euros, or 54 percent more than the income approved for this year “, they added from REGAGEN.

REGAGEN said that the verification of the validity of the company’s request is ongoing, which is why simulating a possible price trend for using the system is speculative. The analysis of CGES, CEDIS and COTEE requirements carried out by REGAGEN will, as was the case in previous procedures, also be available to the public before the final decision is made.

Interested parties can take part in these proceedings during the public hearing. REGAGEN decisions will be made by the beginning of December.

“In addition to the above, electricity buyers also pay a fee for renewable energy sources (OIE), which is determined by the Government, as well as value added tax (VAT), the rate of which is determined by the Parliament”, explained REGAGEN.

When asked whether the increase in the price of electricity will be affected by the fact that the energy companies have significantly increased the number of employees, REGAGEN answered that the prices for the use of the transmission and distribution system of electricity, which are part of the items on the bill for the electricity used, are based on the regulatory allowed income determined by the regulator.

“Part of that income consists of costs that system operators can influence, including salary costs.” The regulatory framework established by REGAGEN for this category of costs does not allow unjustified costs, ie the inefficiency of the operator’s business, to be transferred to the prices at which customers pay for using the system”, said representatives of the regulator.

As they explained, any realized increase in the operator’s costs above the established costs is borne by the operator, who is responsible for the disposal of income and management of the company’s assets in accordance with the Law on Business Companies. Commenting on the possibility of electricity restrictions occurring in Montenegro as a small country, REGAGEN announced that the introduction of restrictions is the last in a series of enforcement measures for any country, regardless of its size.

“We should not forget that providing sufficient amounts of energy, which are necessary for the life and work of citizens and the business and development of companies and their supply in a safe, secure, reliable and high-quality manner, is of public interest. Therefore, the functioning and development of society and the state’s economy rest on a safe supply of electricity”, added REGAGEN.

Therefore, as they stated, in the first place, energy companies are obliged to ensure the complete availability and functionality of the production facilities and systems they manage, in order to respect the public interest, which has not been a problem until now. What is an additional advantage for Montenegro is its, not by chance, extremely good connection with all neighboring power systems.

“In the last ten years, the cross-border capacities have been strengthened with the commissioning of the 400 kilovolt (kV) transmission line between Albania and Montenegro and the submarine cable between Italy and Montenegro”, added REGAGEN.

The representatives of the regulator stated that the restrictions, as the last measure for implementation, would be a confirmation that the public interest is not ensured.

“Therefore, it is the duty of all relevant state institutions and energy entities in the country to ensure that restrictions do not occur”, said REGAGEN.

They announced that electricity prices on day-ahead markets in Europe (HUPX, SEEPEX, CROPEX and South Pool) in October this year averaged around EUR 220 per megawatt hour (MWh), which represents a drop in prices compared to previous months. in this year.

Commenting on the situation announced by most experts and politicians that, even though we have money, we will not be able to get electricity, because, as they say, the main problem is whether there will be electricity, not its price, from REGAGEN explained that the production of electricity in In Montenegro, it largely depends on hydrological conditions.

“The disruptions in the market caused by an unexpected lack of energy, which are mentioned, represent the worst possible scenario in which, according to the Law on Energy, the Government has the authority to take special measures”, explained REGAGEN.

Commenting on the losses, REGAGEN announced that in addition to the inevitable technical losses, which occur due to the laws of physics during the transmission of electrical energy from power plants to customers, non-technical losses are also present in the system.

The system operators, CGES and CEDIS, are exposed to costs for the purchase of electrical energy to cover losses.

“Nevertheless, the losses, the costs of which are borne by the users of the system, refer only to technical losses. The cost of non-technical losses is the exclusive cost of energy companies and is regulated by the Law on Energy”, said REGAGEN.

When asked who makes money from the sale of electricity for losses, REGAGEN answered that it is the producers, that is, the traders, who sell the electricity to the operator of the transmission and distribution system.

“Last year and this year, CGES and CEDIS predominantly procured electricity to cover losses in the system from EPCG”, added REGAGEN.

Commenting on global events, REGAGEN announced that the global energy market has been reacting to occasional unavailability of natural gas since the middle of last year.

“In the year before the energy crisis, 2020, the five largest exporters of natural gas exported quantities of this energy sufficient to meet the needs of even the ten largest importers.” Therefore, it is clear that a problem can arise when, even temporarily, natural gas from one source, such as Russia, is no longer available to importers,” said representatives of the regulator.

The largest importers of natural gas in Europe are Italy and Germany. And while the prices of natural gas and electricity were rising, countries in the European Union (EU) temporarily implemented various measures aimed at protecting households and/or the economy.

At the same time, analyzes of the functioning of the market in the given circumstances and drafting of amendments and additions to the framework regulating its work were undertaken. The European Commission is implementing activities to change the market model and increase the dynamics of the construction of new renewable energy sources.

“Under these circumstances, it is clear that increasing the share of renewable energy sources is not “only” an instrument for combating climate change, but also an increase in energy security. Therefore, the energy sector needs revised long-term goals of its development, definition of medium-term activities in order to achieve them and implementation of temporary measures in order to protect the most vulnerable categories of customers. Of course, functional and efficient institutions are a prerequisite for the above”, added REGAGEN.

When asked whether the savings measures implemented by citizens and public institutions are effective in the energy crisis, REGAGEN answered that energy efficiency is an indispensable part of the energy development strategy, both globally and locally.

“What is visible about it in relation to other segments of the energy sector is that each individual or company, in the capacity of buyer of energy, that is, electricity, influences whether savings will occur with their behavior.” It is indisputable that domestic treatment of energy products is always welcome and that it is necessary to continue raising public awareness in the field of energy efficiency,” said REGAGEN and added that it is a constant process.

However, as they said, we should not forget that savings measures are based on behavioral economics.

“The broader environment, including price signals, affects the individual’s assessment of whether he considers the application of measures necessary or profitable, i.e. reducing his energy needs, or whether he decides to increase consumption due to an increase in his own comfort”, the regulator’s representatives concluded, Dan writes.