Serbia: Energy Community supports EPC efforts for market liberalization positioning

21. May 2014. / News Serbia Energy

Energy Community supports EPS significantly in its attempt for better investment stimulation by the prices of electricity. EPS has to be prepared to give up from its quasi monopoly position.

The key for long term reliable supply of energy in Serbia are the prices which reflect, not only the real production costs, but also give the stimulation for investments in new production capacities – says Mr. Dirk Buschle, Deputy Director of the Energy Community Secretariat of South East Europe in the interview for the magazine “kWh”. Our interlocutor estimates that in spite of partial electricity market deregulation, there is still a lot of work to do in this sector.

What is the role of “Electric Power Industry of Serbia” in the security of energy supply in the Region of West Balkan and countries of Energy Community?
Are you satisfied with cooperation with Serbia and EPS?

Energy Community supports EPS significantly in its attempt for better investment stimulation by the prices of electricity, in the first place, by its price policy of energy in Serbia. EPS has to be prepared to give up from its quasi monopoly position, because if the new participants on the market have not got the way to respond on the immediate challenges on the market, it means that the proactive intervention of the regulator is necessary.

We are waiting for the new Energy Law, and the Third Energy EU Package is very important document. What are the comments of Energy Community on the new law draft?

Serbia is probably going to be the first country in the Region which will completely include and implement the Third Energy Law Package in its law. EU Secretariat cooperates intensively with the Work group which is responsible for the draft developing. We will insist that the final Bill which will be submitted to the Assembly of Serbia be complied with the Third Energy Law Package. However, the additional discussions and the next round of comments will be necessary. According to our experience from 2011, Serbs are very difficult for negotiation, but they respect and implement to that what has been agreed. Serbia follows the plan of the successive arrangement which was agreed with the Secretariat. They are going wise to the successive market opening, and that is by itself a significant achievement.

What does the Energy Community thinks about the previous steps and future market development of energy in Serbia? What is necessary to do in the future, because we have a lot of traders with small participation?

It is not unusual that real market opening requires more time, than it is planned by the Law. The New Law must strictly and clear indicate that public supply is not the option which is natural consequence, and that the change of the supplier is very possible, if there are more attractive offers. The EU Secretariat shall also insist on spare supplier, in praxis it is the same company as a public supplier, which stay only as an option in the short time period, and this shall not be abused, or obstruct the market opening, what retains the current monopolies. Apart from further price deregulation and abolishment of all indirect subventions, it should be enabled the founding of private firms as traders and supplier for householders. All these new traders have to get the right to approach to the electricity which is produced in Serbia, under the same conditions as it is for “EPS Supply”. One option is the possibility to obtain a part of the total produced electricity in Serbia on the stock exchange. These reforms should not be regarded as a burden, but primarily as a chance for Serbia to be a pioneer of regional market development.

“Electric Power Industry of Serbia” and Ministry of Energy are partners in the Energy Community by the implementation of EU policy and standards. Do you think this experience to be important for the restructuring process of EPS and why? What must EPS do to become as one of the EU companies?

It is very important to separate the state EPS ownership from state regulation of the Energy Sector. If the regulatory aim, as declared in Energy Community, is the increasing of competition, the state should not jeopardize this final goal by supporting the domination of its own companies. The full implementation of the Third Package is also very important in this contest. For this reason it will be necessary to separate the “Elektromreža Srbije”, operator of the transmission system, from EPS regarding the control within the government. The strengthening of the Energy Agency independence is also needed, as well as the instruments for intervention that are available. We expect the Energy Agency and Committee for competition protection to implement these rules on EPS in practical way, even in the cases when it can be contradictory to political interests of the Government. I believe that focus of Energy Sector in Serbia must be more on the regulator, because the Energy Agency is the one of the best regulator in the region. The state ownership of the energy company has at the other side the tendency to be polarized, what certainly is not the optimal way of market managing and development, which should not keep the interests of the political parties.

How to secure the investments and investments increasing in the Energy Sector in Serbia and region, especially in the renewable energy resources? Is the price the main factor?

Security of investments is the best when it is secured by clear, transparent and reliable rules and function of the institutions which implement them. This is still a great problem in the region, at least as it is treated by the west investors. Correcting these failures is the challenge which exceeds the Energy Sector. And this is valid especially for the renewable energy sources. In many European countries the praxis has showen that the investors need high supporting tariffs. However, it is also important to make the supporting schema in the smart way, so it could not come to the collapse of the technical and economic system. Now we are the witnesses of that what happens in Bulgaria, because of bad supporting schema, and without accepting the consequences that the buyer must pay, one way or the other. There are still discussions on how to balance the goals of the competitive implementation of the market competition and public, i.e. state intervention in favor of renewable energy sources, or security in energy supply in EU. I will encourage Serbia to participate active in this debate, and learn on the failures of the others.

Regarding the very low efficiency level of energy in the whole region, what is the assignment for the Serbian companies, and what shall the national energy companies do?

The National energy companies can improve energy efficiency in a much defined way. This way is that their energy services, which they sell, include effectively final use of energy, for example a good insulation, the use of hot water out of their own resources, cooling, production and lightening. Maximizing of the profit, for the energy companies, becomes in that way closer connected with the energy services to a greater number of buyers. When the measures for the improvement of energy efficiency are created, it shall be considered wide implementation of economic and technological innovations, as for example the smart electricity meters. For systematic rational use of energy in own rooms, the companies should introduce the energy management system, including energy revision and implementing of the directives. Implementation of the relevant international standards EN ISO is very useful in this case. Adopting the Law on energy efficiency use in March 2013, Serbia achieved a significant step forward of the fitting in the Directive of the energy services, making market for energy efficiency services, and greater including of capital and professional private sector. Soon it will be possible for small and middle companies to give or use energy services for financing of renewing, and implement plans for long term conservation or improvement of energy efficiency.

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