Serbia exclusive: Electricity market liberalization and market share of EPS, impact on big consumers, the report

12. February 2014. / News Serbia Energy

Some customers were not timely informed and some missed to initiate public procurement procedure on time. The most important thing for market functioning is readiness of the operators of the transmission and distribution system say in state energy company EPS. Foreign companies consumers are prepared for new environment. Some companies remained on expensive reserve supply level, Reserve supply is a necessary option for a customer without a supplier. It is expensive and limited to 60 days.

The second phase of liberalization of the electricity market in Serbia has begun at the beginning of the year. Those who lost their right on public procurement on the first day of the year, however didn’t rush to choose their supplier until the end of 2013 and to contract the supply on time.  Therefore, the only possibility that remained for most consumers is an expensive and time restricted reserve supply. This is the fact that marked the continuation of the electricity market opening in Serbia.

According to the decision of the Energy Agency from 2008, all electricity customers in Serbia have been entitled to be supplied in a free market for the past six years, except for households, which, according to the new Draft of Energy Law  that has already passed a public hearing, will obtain that right on 1st  July  of this year.  Those are legal solutions. In practice this looks a bit different. Due to low regulated price of electricity, nobody showed any interest for the free market. Therefore, according to the Law from 2011, the rights on the regulated public supply are limited, by which the dynamics of the mandatory opening of the electricity market is also defined. Thus, since 1st January of this year, only households and small customers are entitled to a public  supply, while the rest of 3,200 customers connected to the distribution system, had to sign a contract on supply with the supplier in the free market by the New Year.  According to the information from the transmission and distribution systems operators, which have the best insight, many of these buyers didn’t contract the supply timely. Some of them were not sufficiently informed about the possibilities and consequences, and some of them didn’t initiated  a public procurement procedure on time.

Best informed are suppliers and those customers – foreign companies, who have already had an experience with the purchase of electricity in other countries. Out of 72 licensed suppliers, only a small number of them expressed interest in supplying end customers. They mainly deal with the wholesale trade, transmit electricity or trade with each other on the territory of Serbia. Only three or four suppliers signed ​​contracts with two or three end customers, and all the other contracts, were signed with “EPS Supply”. We know that customers required bids from several suppliers, and some of them to all of them, so it is obvious that “EPS Supply” made an effort to be more attractive than other suppliers in the market with the offered price. It also seems that one part of the suppliers is waiting to see how things will be this year, and we expect their involvement next year. For the functioning of the market, however, the most important is the readiness of operators. The transmission system operator is completely ready because it has passed a thorough basic training and it has gained the experience in the previous year with the customers at high voltage. It now helps distributors who understand what their duty is, but since they have never done some of these works, they need some time to adjust.

Reserve supply is a necessary option for a customer without a supplier. It is expensive and limited to 60 days. After that period, if the customer still doesn’t have a contract with a supplier, the network operator is obliged, according to the Law, to suspend the electricity supply, because nobody produces electricity for him.

The production process, transmission, distribution, measuring and calculation has always been the same, but it was previously done within a vertically integrated EPS. Although the internal distribution of work was well known, customers weren’t familiar with it nor was it interesting to them. Since 2005, the operators of transmission and distribution systems have been separated as separate legal entities, in order to, as a natural monopoly, enable a free access to all market participants, under the same conditions. Market should provide investments in the construction of new capacities where it is most favorable, as well as the price of energy which is the result of offer and demand, not the result of monopoly position. Suppliers will, in terms of mutual competition, try to purchase energy timely and under the most favorable conditions, and regulated power systems, which represent, a natural monopoly, will try to establish standards for the services that the operator must provide to customers regarding the time required for connection, quality of electricity, voltage, number and duration of failures in the network, responses to complaints of system customers, etc.

Source; Serbia Energy

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