Serbia: The electricity market in Serbia, the monopoly is only formally brokenThe monopoly is only formally broken

23. January 2018. / News Serbia Energy

Electricity market in Serbia has been liberalized for three years, but Electric Power Company of Serbia (EPS) continues to cover its most significant part. The issue of EPS’s factual monopoly was re-launched at the end of last year after the inscription on the decision of the authorities in the two cities of Serbia, Kraljevo and Valjevo to buy public lighting from Croatia.

This is, however, a small part of the electricity transactions in a country where EPS holds 98% of the market. When it comes to households supply, this largest public company in Serbia covers complete supply.

There is no monopoly on paper, but in reality, Electric Power Company of Serbia is in the position of the dominant market player.

“In order to create stronger market competition for the benefit of consumers, the best way would be if independent electricity producers in Serbia, such as the EPS manufacturer, would appear, which would then have also the role of a supplier of their energy,” says Slobodan Ružić, energy expert and director of the company “Energy Saving Group”.

He notes that the legal framework for opening the market with electric energy is made, but that it takes time for other suppliers to strengthen their position on the market.

“We now have suppliers as buyers of some energy from the environment that are supplying our consumers, so they are in a rather unhealthy position. It is hard to expect that they can, in many cases, compete with EPS with such a position.” Ružić estimates.

Our interlocutor, however, states that this is a natural process at the beginning of the market opening in a country that had a monopoly producer.

“Even if we want to see independent producers in Serbia tomorrow, they should take five or ten years to build their capacities.” Ružić estimates.

In November last year, the news were that Kraljevo and Valjevo will buy electricity for public lighting and domestic traffic from Croatia. The city of Kraljevo has concluded a contract for supplying public lighting with the Croatian Electric Power Company (HEP) in August, according to the media, worth 80 million dinars, for a period of one year.

The City Administration of Valjevo also accepted the offer of HEP, for supplying public lighting and traffic light, on a tender that was announced in April 2017. Officials from both cities explained that the offer of HEP was lower than EPS’s offer. Croatian Electric Power Company has previously announced that it already supplies one company with electricity in Serbia.

Nevertheless, EPS dominates the market in Serbia, and the Minister of Mining and Energy Aleksandar Antić noted this in November after the news from Kraljevo and Valjevo. According to him, this is proof that EPS has worked well in market conditions.

“The electricity market in Serbia was opened in 2013. Despite this fact, Electric Power Company of Serbia retained 98 percent of the market (commercial electricity customers). When the citizens are concerned about the total supply, EPS is the one that is the result of regulated prices of electricity. “said Minister Antić.

The electricity market has been opened gradually. Since January 1, 2013, large industrial consumers have become obliged to purchase electricity on the market, while for households and retail customers they have been in the market since January 1, 2015, but they still have the right to a public supplier designated by the Government.

The market therefore exists so that the biggest supplier understands that it has to fight for its consumers, observes energy expert Slobodan Ružić.

“The real question is neither for us nor for you why a municipality was buying from another electricity, and not from EPS, it happened because they gave a better offer. The right question is for the one who manages the Electric Power Company of Serbia “why I missed the opportunity or lost one of the consumers I had, why did not I give a better offer for that consumer to be mine”, says Ružić.

In December 2016, the Council of the Commission for the Protection of Competition issued a decision stating that the Distribution System Operator of EPS Distribution d.o.o. Belgrade, as the only operator in the electricity distribution market of Serbia, abused the dominant position. The Commission found that the aforementioned company had abused its dominant position by placing certain commercial suppliers with electricity, in particular EPS Supply, in a more favorable position than other competitors.

A fine of 330 million dinars was imposed. As stated in the announcement, the Commission particularly appreciated the cooperation and treatment of EPS Distribution which, during the course of the procedure, amended the controversial acts and expressed the will to completely eliminate the behavior on the market that led to the violation of competition.

It is known that operators that have a dominant or even monopoly position on the market use this situation to apply certain barriers to entry into the market of new competition, says former president of the Commission for the Protection of Competition and Professor of Competition Law Dijana Markovič Bajalović, but notes that it can not be said that they do it without prior market analysis.

“In the so-called. infrastructure activities, where production and transfer to consumers depend on the possession of certain capacities that are very expensive, it is necessary to enable the entry of new competition to various types of regulatory measures that control the behavior of an existing monopolist or dominant market participant. This is the task of the regulatory body, in this case the Energy Agency. In cases where the regulatory authority is in charge or its measures are not effective enough, the issue of violations of the Competition Law can also be raised, that is, the procedure can be conducted before the Commission for Protection of Competition.” explains Marković Bajalović

Improving competitiveness, energy supply security and environmental protection are also the goals of the EU’s energy policy, with which Serbia will have to align itself with Chapter 15 on energy in the framework of accession negotiations with the European Union. Although there have been some indications that this chapter could be opened at the end of last year, this still did not happen, and energy has not been found among the 12 previous chapters that have been opened.

Public companies such as EPS are not directly related to the criteria that the European Commission has currently set out in the chapter on eneregetics, says Ilija Bastas Bijelić, a research associate at the Faculty of Electrical Engineering and a member of the Research Forum of the European Movement in Serbia, but added: “There are many other elements of the European Acquis (EU law) related to competition issues and so on “.

Announcing new projects, Minister of Energy and Mining Aleksandar Antić said, among other things, that there is a progress in development of those that are the future of Serbia and EPS, and that is a number of renewable energy projects.

“We have signed all the contracts related to financing the first wind farm that EPS will work on, which is Kostolac and 66 MWh of wind energy”, Antić said.

Increasing the share of renewable energy sources as an alternative to fossil fuels (wind energy, solar energy, hydroelectric power, and tidal energy) in final energy consumption is one of the goals set by the EU that Serbia has taken over, Bijelić says.

The share of renewable energy in total production in Serbia is very important because the country has large hydro power plants and about one third of the total production comes from renewable sources such as Đerdap, Bajina Bašta and other hydroelectric power plants, explains energy expert Slobodan Ružić. But he notes that when it comes to penetration of new renewable sources into the manufacturing sector, such as small hydroelectric power plants, solar power plants, wind farms, biomass power plants and biogas, that Serbia is very taxing.

“Such objects are very slowly built, there are many obstacles. We started much later than other European countries, they have barriers to the construction of such facilities and their inclusion in the network has existed for quite some time. Now, through our regulations, they are reduced to a reasonable level, but investors continue to encounter many problems in realizing their facilities. And there is a huge space for future investments, primarily the private sector”, Ružić said.

Summarizing the results, the minister of energy, Aleksandar Antić, at the beginning of this year, said that he is proud of what EPS has achieved in the previous year.

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