Serbia: Conflict between the Energy Community and “Srbijagas”

4. October 2016. / News Serbia Energy

Government has two weeks to resolve the issue of unbundling of transport and distribution in “Srbijagas”, otherwise there will be no money from the EU funds.

The Ministerial Council of the Energy Community of South East Europe will discuss in Sarajevo on October 14, about the imposing of sanctions on Serbia due to continued refusal of “Srbijagas” to unbundle the activities of transport and gas distribution and allow the competition on the market, confirmed Janez Kopac, the director of the Energy Community Secretariat after the sitting of the National Assembly Committee on the Economy and Energy.

He reminded that “Srbijagas” is being waited for four years to unbundle activities, i.e. gas transmission system from the commercial supply, otherwise it causes damage to consumers, and there is a benefit only for the public company, which is not good.

When asked what that actually means, Kopac explained that it means that the price of gas for the households in Serbia would probably be much lower, if these activities were separated, or if “Srbijagas” would allow the presence of a third party in the gas transport. There are many interested parties who would supply gas to Serbian consumers, and the more interested parties, the price is lower. This means that there would be no monopoly of “Srbijagas”.

He commented the statement that the Government is the one that should press Dusan Bajatovic, General Manager of “Srbijagas” to complete this activity, adding that he agrees with the statement, and that it is not true that the company is unbundled as it is claimed in Serbia.

– Administrative unbundling with one employee is not what the law requires from Serbia when it comes to “Srbijagas”. Serbia had to unbundle the activities according to the law, and according to Second Energy Package 2007. We have two more weeks to resolve what has been waited for, in order to avoid the situation when “Srbijagas” “would not let anyone in its pipe”.  Serbian Government is responsible for fully implementing the adopted laws and fulfilling its international obligations, considering that the Government is 100 percent owner of “Srbijagas” – said Kopac.

There is an offence proceeding against Serbia due to non-separation of activities, to which the Serbian Government is committed.

When it comes to measures that might be taken against Serbia in Sarajevo, Kopac mentioned suspension of EU resources from various funds, disenfranchisement, and costs compensation for the cooperation with the EC. At the same time it can be expected that international financial organizations might suspend cooperation with our country.

When asked whether this means that Serbia could be deprived of money from European funds, he said that this decision is made by the European Commission, but that such penalties were imposed last year on BiH and that it would not be good for Serbia.

With reference to the statement that EC is inexorable towards Serbia, and that Croatia was also forgiven for not separating transport and distribution before accession to the EU, Kopac says that he would not return to the past, but that it does not make sense to be waiting four years for “Srbijagas” to finish this activity.

Kopac also did not want to reveal the details of the discussion with the Minister of Energy, Aleksandar Antic, nor to specify what the Serbian side could offer as a solution to these problems at the Ministerial Council in Sarajevo.

Since in the report of the Energy Community they are not satisfied with the price of electricity in Serbia, especially the fact that the state controls the price, Kopac says that electricity should be less expensive for socially vulnerable groups in Serbia, but not for everyone. At the same time, ignoring the fact that in Serbia there is already a Regulation on energy-protected customers who are entitled to free electricity and gas, but only a fifth of them uses this benefit, due to the fact that it is more expensive for them to apply for it, than to pay a monthly electricity bill.

When Aleksandra Tomic, a member of the Serbian parliament, was asked whether the reason why “Srbijagas” did not separate the functions is the fact that the Minister and the “Srbijagas” General Manager are from the Socialist Party of Serbia (SPS), she said that this was not the case.

– I’m sure that nobody does it on purpose, nor for political reasons, since this process have already started, and it is in everyone’s interest to be completed, she said.

Jelena Simovic, Assistant Minister at the Ministry of Mining and Energy, explained that Serbia is preparing for the upcoming Ministerial meeting of EC in Sarajevo, and does not want to tell half- truth with reference to the gas sector.

– Article 24 of the Contract states that specificity of the contracting party must be respected – said Simovic, adding that Serbia is investing great efforts in terms of “Srbijagas”. Appropriate analyses are being conducted. There are various aspects and reasons, for example, financial and others.

At the meeting in Parliament, Kopac said that it is also urgent to solve the political problem and that is the including of EMS in the functioning of the regional offices in Podgorica for the sale of cross-border capacities, since Serbia is not a member of that body.

The third problem is the relationship between EMS and Kosovo Electricity Transmission System and Market Operator  KOST, where there is a contract from 2014 but it has not been applied due to the details related to the north of Kosovo, and there must be more good will on both sides, said Kopac.

Gas would be 30% more expensive

Dusan Bajatovic, General Manager of “Srbijagas” dismissed all claims of Janez Kopac, director of the Energy Community Secretariat that gas would be cheaper for the households in Serbia as soon as the functions in “Srbijagas” are separated.

– Theoretically, as the offer is higher, the price is lower. However, all EU countries that allowed third party access and whose gas companies unbundled activities did not get cheaper gas. On the contrary. The price of gas has increased. I claim that the gas for the households in Serbia would be around 30 percent more expensive, and only those who do not understand this business, could claim contrary, Bajatovic confirmed for “Politika”.

The additional problem is that this could lead to energy insecure situation in Serbia.

– Representatives of the Energy Community know perfectly how the market functions and that the price in these circumstances is determined by the oligopoly system or informal agreement between the companies. They agree price and under enforced performance they will agree higher price. Otherwise, Serbia would not have the cheapest gas in Europe – Bajatovic said categorically.

“Srbijagas” will separate the activities according to the law, when the objective conditions are met, he emphasized. In order to do that, it is necessary to finalize the financial and organizational restructuring of the company and the question is where competent people from the Energy Community are rushing and who needs to enter Serbia with the gas – he says.

Although he could not say what Serbia could offer as an answer to the Council of Ministers on October 14 in Sarajevo, the unofficial information is that only a new date for the completion of this work in “Srbijagas” will most likely to be proposed.

The same unofficial source of “Politika” says that the reason for this nervousness of the Energy Community representatives is that they must have a good reason to continue working and they should check what EC has done for Serbia so far.

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