Serbia exclusive:Electricity market liberalization current status, power traders and big consumers, the report

28. August 2013. / News Serbia Energy

Although electricity consumers at high voltage are obligated to buy electricity directly at market since the beginning of this year, only “Messer Tehnogas” decided to change a supplier. The rest 26 buyers that have lost right on public supply signed a contract with state power utility company “Elektroprivreda Srbije” (EPS).

EPS increased electricity price by almost 70% at once for buyers on high voltage on 31 January and only a month after market liberalization for this category. “Messer” which has 5% of total consumption of all buyers at open market signed a contract with Slovenian Company GEN-I because of this electricity price increase.

-Serbia has 30% higher electricity price than Germany with this price shock, although it had very competitive prices by then. This is dramatically negative influence on Serbia as industrial location. We were not prepared on such drastic price increase. No company in Serbia had experience in cooperation with any other company which deals with electricity sale except from EPS and we also had no knowledge how foreign companies function. We decided to risk. We chose another supplier instead of EPS because of more profitable price and we concluded a contract for electricity supply with Slovenian Company GEN-I- Ernst Bode explained Director of “Messer Tehnogas” Company.

Bode stresses that they are very satisfied because of correct decision to have good cooperation with Slovenian company.

-Although electricity expenses are still higher than same costs in Germany or we pay 50% more for electricity than earlier, in comparison with EPS’s offer, we achieved significant saving with supply from GEN-I- Bode underlines.

6 companies in reconstruction, 7 companies in private ownership and public companies are on the list of industrial buyers that have right on public supply.

63 suppliers are licensed in Energy Agency, 27 of them is active. We wanted to know why did the private companies continue to buy electricity from EPS, not from any of these 27 suppliers despite price increase.

Companies “Titan Cementara”, “Holcim”, “Lafarge” and “Sirmium Steel” didn’t answered us, as well as “Fiat automobili Srbija”.

GazpromNeft NIS answered on the question why Oil Refinery Pancevo decided to sign a contract with EPS considering that EPS increased electricity price at the beginning of the year:

-Contract with EPS was signed in accordance with the result of open tender, condition at the electricity market after its partial liberalization, in accordance with valid laws of Serbian Republic and based on the fact that this company offered NIS the best conditions related to delivery of electricity.

This company says that they would reconsider a possibility of signing contract with another supplier and they ask conditions- competitive commercial conditions and provision of guarantee for stable and regular delivery of necessary amounts of electricity for undisturbed NIS’s work.

Although only 10% of market was opened since the year’s beginning, Vladimir Markovic, Primus GBS Consultant for Energy believes that free electricity market does not exist anymore.

-Everything is in hands of state where I don’t think about EPS’s privatization but if state wants a normal corporation that will make profit while policy will be lead by Government. Such situation everything is possible and it is not actually free market because EPS is not a corporation. EPS still can transfer expenses of its business to other participants and EPS is not directed with clear business goal. EPS is not even an owner of “its” property. On the other side, much business in Serbia exist only because electricity price was like that so we can maybe see serious transfers in purchasing side also. Many buyers that are obligated to sign contracts is not capable of paying electricity and companies that were in reconstructing had legal right to do it- our interlocutor emphasizes.

Tender for reserve supplier by the end of 2013

Big industrial consumers that didn’t manage to sign contracts with some of electricity suppliers on domestic market on time i.e. by 1 January and they had right to be supplied by reserved supplier in 60 days’ period. Serbian Government decided for EPS to be temporary reserve supplier.

As we find out in this public company, no buyer on high voltage was on reserve but on complete supply.

Ministry of Energy explained that tender announcement for reserve supplier can be expected after adopting changes of Energy Law and it is by the end of the year the latest.

The second stroke of market liberalization

The next phase of electricity market opening that will be on 1 January 2014, around 4.000 and 5.000 companies should go out on the market. According to Energy Ministry’s announcement, only households and small electricity buyers (legal persons and traders with less than 50 employees and annual income of 10 million EUR) will remain in the system of public supply while buyers on mid voltage and part of buyers on high voltage will arrange supply at the market.

-Total consumption of these buyers amounted 5,5 TWH in the last year. Big, small and mid corporations represent the most healthy part of Serbian industry- it is stated in the Ministry of Energy.

The first man of “Messer Tehnogas” says that he is not convinced that second wave of liberalization for consumers on mid voltage will happen by 1 January 2014.

-This will maybe last little longer, although EPS should have administrational abilities to prepare market and conclude all contracts.

Bode expects that future offered price and flexibility of supply is crucial factor in choosing electricity supplier.

-Prices of electricity traders should be related to price on European stock markets so price of final consumer depends on transfers at these stock markets. However, EPS is electricity producer and it can form its price in more profitable way if it wants to, but it needs to have a wish to be more competitive than any other electricity trader and they should be convinced that it is more important to support Serbian industry than export cheap electricity.

That electricity price for following period is not easy to predict is confirmed by VMarkovic considering it is in short term “everything can be changed over night by Government’s decision”.

Only when we see clear which is the idea of the state from EPS’s point of view, we will be able to deal with forecasts more seriously. HEP started to lose customers in Croatia, although battle is on higher price level. Observation of electricity prices on stock markets in region can also help us to realize if conditions for forming free market will be managed again, only well directed EPS will be able to be regionally competitive to do business according to the rules that are valid only for European market which is obligation overtaken by Contract for Energy Association.

Households are predicted to be able to freely choose its supplier on market since 1 January 2015 and they will keep possibility to use public supply.

Source; Serbia Energy

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