Serbia: Legal framework for congestion management in cross-border electricity trade

27. January 2020. / News Serbia Energy

The availability of electricity is one of the preconditions for the survival of modern civilization. There are only a few commercial activities in human history that have so quickly become an inseparable element of everyday life. The great importance and development of energy activities is accompanied by the need to establish a legal framework, both nationally and internationally. In order to realise their commitments, the Energy Community Contracting Parties have taken over the implementation of EU regulations adopted in accordance with EU energy policy. Defining the regulatory framework establishes a special legal system – the acquis communautaire, with which all countries aiming to become EU members have to harmonize their existing regulations.

The EU, determined to establish a single regulatory framework for electricity trade outside the Union, has launched the process of creating an electricity market, which has evolved in the process of creating an Energy Community in Southeast Europe.

By signing the Energy Community Treaty, Serbia made it possible to open the market, guaranteeing investments and control of regulations in the energy sector, both within the borders of its control area and regionally. The integration of the national and regional electricity markets entails, first of all, the harmonization of the national and international legal framework, and then the establishment of a common approach in the implementation of the set supranational principles and rules.

With the adoption of the Energy Law in 2004, alignment with EU regulations and directives in the energy sector began, and a regulatory framework was established for the establishment and functioning of the electricity market, based on transparent, non-discriminatory and fair market principles.

Today, the acquis communautaire for the energy sector consist of three legislative packages. The first legislative package to initiate reforms in the electricity sector includes Directive 96/92; second package Directive 2003/54 and Regulation 1228/2003; and the third includes amendments to the existing Directive 2009/72, Regulation 714/2009, as well as the Directive establishing an Agency for the Cooperation of Energy Regulators in Europe.

National transmission systems connected by interconnections, in order to increase the power system operation security, are facing the growth of the international electricity market and the entry of a large number of new entrants within and beyond national borders. Due to the inadequately designed and prepared transmission network for so many participants, “congestions” are emerging. Congestions are the result of the inability of interconnections, which connect national transmission networks, to receive all physical energy flows resulting from international trade between market participants.

In order to eliminate congestion, it is necessary to apply appropriate rules which, by means of non-discriminatory market methods, will offer effective economic signals to market participants and transmission system operators. In accordance with the decision of the EU Commission of 9 November 2006, Guidelines on capacity allocation and congestion management were issued. Particular attention was paid to setting up a mechanism for reimbursement of cross-border electricity flow services, establishing general congestion management principles, creating harmonized principles for the payment of cross-border electricity transfers, and to allocating the available capacities of interconnectors between national transmission systems.

One of the key steps towards establishing the national electricity market of Serbia was the incorporation of the public company Elektromreža Srbije on 1 July 2005, as the entity in charge of electricity transmission, transmission system management and organization of the electricity market, as well as the allocation of the right to use available of cross-border transmission capacities, which since 27 October 2016 has been operating as Joint Stock Company Elektromreža Srbije (EMS).

In June 2006, the Energy Agency of the Republic of Serbia (AERS) issued its first electricity trading permit, and as early as November 2006, EMS allowed access to the capacity market only to those participants who received a trading license from AERS. Since then, the system operator has continuously allocated cross-border capacities at all borders and in all directions.

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