Serbia exclusive: EPS Supply Co ready for competition, EPS Supply CEO on power market development

5. May 2014. / News Serbia Energy

The electricity market liberalization in Serbia could go in the third final phase already from the middle of the year if the National Assembly of Serbia adopts a new energy law as it has been proposed. We have no doubt that this law will be among the first on the agenda of the new parliamentary convocation due to the fact that the harmonization of domestic regulations in the energy sector with the European directives and regulations marked the first steps in preparing for the accession to the  European Union. Simultaneously with the deadline change for the further market opening (still valid law stipulates that the liberalization of small customers and households should begin on 1st January 2015th) , start the activities of the possible change in tariff system , which would further enrich the entire power milieu, but in pieces, regulated and open market. Mr. Zeljko Markovic, Manager of EPS Department for distribution and acting director general of Subsidiary Company “EPS Supply”, in an exclusive interviw reveals the EPS Supply development strategy.

Serbia Power Utility Company and its subsidiary companies are not obliged to create and develop the electricity market, but they behave in accordance with the norms and regulated. What is it expected from EPS in the third liberalization stage of the internal electricity market?

Following principles and rules of the electricity market opening in the first two phases, which were conducted in 2013th and during this year, EPS did not only change its attitude towards the electricity consumers by building a market position towards customers, but also its own organization and structure providing thus preconditions for preservation its market share also in terms of legitimate competition from other retailers and potential suppliers. The separation of distribution and supply function was a major step in that direction. The Subsidiary company “EPS Supply” was founded, which deals with commercial and public supply.  At high voltage, where are major electricity consumers, EPS has actually maintained its dominant role in major industrial customers supply. The same thing happened at medium voltage, that is, on the rest of the market, which includes all customers except small ones and households. Moreover, by the decision of the Government of Serbia, the role of not only the public but also the backup supplier was entrusted to EPS, so that “EPS Supply” in fact accepted almost all the customers at medium voltage which have the right to choose their supplier by 1st January 2014th. I believe that the third phase of the electricity market liberalization, whenever it starts, this year or early next year, also will not much change in the EPS participation in this market segment. This is about households and small customers, so called small business, such as craft shops and stores, with annual consumption of less than 30 thousand of kilowatt – hours. All they can continue to exercise their right on public supply, but also to choose their suppliers on the market if they want. Whatever they decide, “EPS Supply” is ready to meet them. Here I must draw your attention that small customers who do not meet the specific consumption condition will have to choose a supplier, because they will not be able to stay on the public supply.

We can hear that a large number of those who use electricity for heating will rather choose a market than regulated price, because of the expensive “tricolor tariffs”. Is such a calculation founded?

The possibility that households and small consumers will be able to choose their supplier is important in terms of the formation of the retail electricity market. This will mean that the internal market is fully liberalized. It cannot, however, be expected that this liberalization step will bring lower prices for households, as was the case in some neighboring countries. Regulated electricity price for public supply in Serbia is not influenced by market laws, and it is lower than the price realized in the open markets of the neighboring countries. This relation can be expected in the future although with the growth of living standards in Serbia also will grow the regulated electricity price. Other suppliers, in addition to the public, will be able to count on the part of buyers form the household category who will buy electricity for heating. The average price of kilowatt – hours for this customers group, in the heating season, reaches and even exceeds the amount of the market price.  So, for example, the more favorable bill for the consumption of more than two thousand kWh per month may be offer at the market prices than it would have been in the public supply under the current tariff system. Also, if a distribution system operator does not be constituted, the customers in the area of Vojvodina and Belgrade will be in better position, because it will have fewer expenses to cover distribution costs. Therefore, the market game in the area of ​​”Elektrovojvodina” and EDB could start immediately after completion of the third liberalization phase. It is, however, a small number of customers compared to everyone else, which do not heat by electricity, and for them the regulated price still will be cheaper than the market.

Does the formation of one distribution system operator represent requirement for standardization of the customers’ initial position or there are different options?

As is well known, because of the different accession prices to the distribution system, which is regulated by the Energy Agency starting from different development degrees of ED systems in subsidiary companies for distribution and, therefore,  different costs of electricity distribution, the Serbian Government adopted a decree by which this problem has been temporarily bridged, but not resolved. For a permanent solution, it is necessary to establish a distribution system operator instead of the current five and thus to level and unify distribution costs in the territory of Serbia. For a long time, we in EPS and in the relevant ministry have discussed on possible options for organizing the distribution system functions and again and again showed that an operator was better solution than five. In Slovenia and Croatia they came to similar conclusions liberalized market, and both chose to have one of the distribution system operator owned by the state. In short, if we do not have a distribution system operator, it can happen that amount of distribution costs blur any discussion on electricity prices and supply in a liberalized electricity market.

Changes in tariff system have been announced, which applies to public supply. Can it be expected to alleviate the differences between kWh prices in the three existing zones?

RS Energy Agency is responsible for the tariff system change and there is a committee that deals with this issue within the Agency. In addition, the Agency is open to all suggestions, so a commission that should examine all the shortcomings of the current tariff system and suggest its possible corrections has been formed within the EPS.

Will other suppliers be able to offer a single kWh price regardless consumption period on the open market?

The tariff system exists to protect the power system from the high consumption impact, that is, to ensure consumption uniformity during 24 hours. The public supplier shall apply a tariff system in the public supply. All other market participants have no obligation to apply a tariff system that is necessary for public supply and can put together their tariff plans in a way that is closer to the customer and adjust its offer to their needs. This also applies to “EPS Supply”, so it can be confidently expected that we actively participate in the competition in terms of new tariff packages in the commercial supply. Upon completion of the introduction of the origin guarantee, “EPS Supply” will come out with packages within which it will be offered energy from renewable sources.

Since “EPS Supply” has activities in the public and commercial supply, whether the appropriate organizational changes in this Subsidiary Company also should be expected with the open market expanding? 

Sure. The Ministry has announced that in the coming period will review and redefine the organization of “EPS Supply” keeping in mind that currently this company has both commercial and public supply function.

Source; Serbia Energy

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