Serbia: Historical minimum of electricity price 26EUR/MW, price blocks the development of Power utility company

Published on 11. December 2014., News Serbia Energy

The electricity price is a topic that in recent months the local public a lot talks about and bids a percentage of price increase of 15 to 30 percent. Although the price correction has been repeatedly announced and mentioned as part of a package of public finances recovery, and even was one of the reasons for the resignation of former Finance Minister Lazar Krstic, presumably the 2014^thyear will be remembered as the year in which the price electricity has not been changed.

The Prime Minister Aleksandar Vucic put the point to all speculations and contradictory statements on the subject, which is under the public eye. On the occasion of the visit of the Mining Basin “Kolubara” in mid-November, he said that “the increase in electricity prices will not be in the winter, certainly not until the spring or summer of next year.”

Energy Minister Aleksandar Antic repeated that there would not be the price increases this year. Minister Antic said that it is not a financial decision of EPS Management but issued under the overall situation in the country. However, the price will gradually, over a long number of years, reach the economic level, taking into account the social and economic situation in the country and the purchasing power of citizens.

Instead of the “real” price increases, some media reported that the government was considering the possibility of introducing excise duties on electricity from April 1^st next year, which Antic described as media speculation and said that the ministry had a “clear, professional dimension why something like that was not good”. It can be also assumed why – in the case of the introduction of excise taxes, the money would be poured into the budget, and not in EPS coffers.

That electricity prices cannot remain at current level assessed Pavle PetrovicPresident of the Fiscal Council. “The price of electricity has to grow, even though it is painful measure. The low price just pushes higher consumption of this expensive and scarce product”- said Petrovic.

The electricity price in Serbia of 26 EUR per megawatt is not just at its historical minimum, but it is also the lowest in the region. By comparison, the kilowatt-hour in the most expensive, red zone is slightly cheaper than the price that the Croatian Electric Power Industry (HEP) offers to its customers.

EPS Director Aleksandar Obradovic said that this public company lost around six billion EUR for the past eight years due to noneconomic electricity prices.

Member of the Council of the Energy Agency Ljiljana Hadzibabic believes that EPS should more often, even twice a year, seek higher electricity prices, so that it reached the market level over the next three years. She stressed that Serbia in the following period had to build 1,500 megawatt power plant in order to ensure a secure electricity supply.

The current electricity price, although covering depreciation costs, overhauls and regular maintenance, is the brake for investment in new energy facilities, which could be a big problemin the near future, considering that the average age of the EPS plants isaround 40 years. Not only that EPS has no money to build new facilities, but even private investors do not see space for investments that would allow recovering the invested money.