Serbia: Energy Community expects complete restructuring of power utility EPS and full unbundling of distribution

, News Serbia Energy

Serbia is the first Contracting Party that transposed the Third Package by adopting a new Energy Law in December 2014. The Law specifies that the bulk of the necessary secondary legislation is to be passed within one year reads the latest Energy Community implementation report.

The vertically integrated undertaking Elektroprivreda Srbije (EPS) performs generation, distribution and supply activities. In July 2013, legal unbundling of distribution system operators from supply was completed. In November 2014, the Serbian Government adopted a programme for EPS’s reorganization. In the first phase finalized on 1 July 2015, EPS was reorganized into three legal entities. Six electricity production subsidiaries and the subsidiary that carried out coal production were merged into the parent company, while four electricity distribution subsidiaries were merged into the distribution company Elektrodistribucija Beograd to form a subsidiary EPS Distribution. The company EPS Supply continues to operate as a separate legal entity within EPS. In the second phase, EPS will be transformed into a joint-stock company until 1 July 2016.

According to the new Law, all customers are free to choose their supplier. Regulation of electricity prices is limited to universal service for households and small customers only. Following a public tender procedure, the Government appointed EPS Supply as a supplier of last resort.

In 2014, 40 suppliers were active in the electricity market, mainly in the resale and cross-border trade, while seven suppliers were supplying final customers.

The provisions of the new Energy Law on authorisation and tendering for construction of new generation facilities are in line with the acquis. Pursuant to the Law, in 2015 the Ministry issued the Rulebook on Energy Permits, regulating in more details the conditions and methods of issuing energy permits, as well as the content of the register of issued energy permits and the register of expired energy permits. The Ministry is responsible for issuing energy permits and conducting tendering procedures. A decision on the public tender announcement shall be issued by the Government upon the proposal of the Ministry. Results of the authorisation shall be monitored by the Ministry with the aim to notify the Government if there is a need to announce a public tender.

Unbundling of the distribution system operator is transposed in line with the Third Package but has not been fully implemented. The legal unbundling is done in compliance with the Third Package requirements. However, in order to ensure non-discriminatory behaviour, the distribution system operator must also functionally unbundle and appoint a Compliance Officer and adopt a Compliance Programme, upon prior consent of the Energy Agency of the Republic of Serbia (AERS). The Compliance Programme shall be adopted within one year upon enactment of the Law.

Having in mind that EPS is fully state-owned companies, supervised by the Ministry of Economy, Ministry of Finance, and Ministry of Mining and Energy in accordance with their particular competences, further measures have to be undertaken in order to ensure separation of control in line with the unbundling requirements of the Third Package.

The third party access to transmission and distribution systems is transposed in compliance with the Third Package. Prices of access to the transmission and distribution systems are determined and published based on the methodologies adopted by AERS. In addition, AERS shall adopt a Methodology for Determining the Price of Access to the Closed Distribution System within six months upon enactment of the Law.

According to the new Energy Law, as of 1 January 2015, all final customers except households and small customers are obliged to choose their supplier at the electricity market under the unregulated price. All customers that according to the new Energy Law do not fulfil criteria for the small customer category, namely those that had annual consumption over 30,000 kWh in 2014, are obliged to choose their supplier until 1 July 2015 at the latest.

The right to be supplied under regulated prices remains only for households and small customers, who may choose to be supplied by a guaranteed supplier. The price of a guaranteed supplier will be regulated by AERS, based on the Methodology for Determination of the Price of Electricity for the Guaranteed Supplier. AERS is obliged to publish the first report on the need for further regulation of this price until 1 May 2017. Upon the assessment of AERS that the need for further regulation of the price ceases to exist, the Ministry shall conduct a public tender procedure for choosing a guaranteed supplier. Within six month of the appointment of the guaranteed supplier, AERS shall abolish further regulation of the electricity price. In practice, EPS Supply continues to perform the function of guaranteed supplier under prices regulated by AERS until and if a guaranteed supplier is designated on the basis of a public tender procedure.

The new Energy Law defines that prices of ancillary services, namely primary regulation, voltage regulation, black start and islanding are regulated by AERS, where prices of reserve needed for secondary and tertiary regulation may be regulated, depending on the assessment of AERS of the need for full or partial regulation, depending on the competition level, development of the regional market and cross-border capacities. In practice, AERS adopted the decision on prices of ancillary services where a separate price for each ancillary service is defined. Based on the regulated prices, TSO co EMS procures ancillary services from EPS.

Following the adoption of the new Energy Law compliant with the Third Package, secondary legislation must be passed as soon as possible in line with the deadlines stipulated by the Law. This concerns in particular regulation on licensing, including certification procedure, which is to be passed by the Ministry within six months after the Law was promulgated.

The process of EPS restructuring must be completed in a way that ensures the full unbundling of the distribution system operator in line with the Energy Law. , transmits

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