Serbia: Market liberalization 2015; Unexplored Territory for EPS Power utility company?

, News Serbia Energy

At the beginning of year, when, in addition to the already opened Slovenian and Croatian markets, the markets in Serbia, Bosnia and Herzegovina, Montenegro and Macedonia have also been completely liberalized, more electricity traders may also appear. For now, the Serbian power utility company EPS is protected from the competition by the low kilowatt price. There are a little more than two months left until the beginning of the third, last phase of opening of the electricity market in Serbia. Namely, as of 1stJanuary 2015, the households will also be able to choose whether they will continue buying electricity from the public supplier, the company ”EPS Supply“ or they will start buying at market prices from the most favourable supplier.

Technically, the procedure for changing the supplier will not be complicated for the citizens, because it will be sufficient to sign the contract with a new, one of the chosen licensed suppliers, but previously, they have to regulate their debts towards the present supplier. If they do not choose a new partner on the market, those households, as well as small buyers–having less than 50 employees, the annual turnover of less than 10 million euros and consuming less than 30.000 kilowatt-hours per year–will still be supplied by the EPS and this at regulated prices. Those familiar with the situation on the electricity market say that it is unlikely that other traders will offer a lower electricity price than the public supplier, which, on the average, amounts to around 5 eurocents per kilowatt-hour, VAT excluded, and therefore they do not expect a big outflow of consumers from the EPS either. At least not immediately after the market opening. The households that use electricity for heating and that are in the ”red tariff” during winter months could possibly find interest in the transition to other suppliers.

For now, the licensed electricity traders are not revealing their strategy of market performance in the fight for households. Electric Power Industry of Serbia is ready for 1st January 2015 and the opening of market for households and small consumers.

“The EPS has successfully dealt with two waves of electricity market opening and we have managed to retain as much as 97 percent of the market and thereby to prove that we are a reliable partner to the Serbian economy. We are actively monitoring all market occurrences and carrying out the preparations for the next liberalization phase”, it has been explained in the EPS, with the emphasis that a real market game can be expected only when the regulated price for public supply has reached the level existing on other electricity markets. Until then, according to the experiences of other countries, though they will also be entitled to purchase electricity from another supplier, the citizens will not decide to do this because the price for public supply is still the most favourable, it has been commented in the EPS.

“On the level of theory and consideration, the liberalization of the low-voltage market looks very promising, because,on any level,any competition is positive. However, for now, on this market of ours, which is limited, having neither depth nora real economic price, this is still left for a more distant future. The liberalization must be carried out gradually”, says Nikola Rajaković, a professor of the Faculty of Electrical Engineering in Belgrade.

A technical circumstance which, in his words, will working in favour of the liberalization is the development and wider application of smart, intelligent grids, primarily on the low voltage. ”Smart grids enable the market to become a technical reality, and the liberalization to gain its full meaning. Owing to them, the consumers can obtain relatively easily, among the rest, the information from the supplier and thereby achieve benefits. Parallel to energy efficiency, the developed world has made a significant progress on this issue“,Rajaković says.

In addition to the ”EPS Supply“, today, in Serbia,consumers on high and medium voltage are buying electricity from several more licensed suppliers: GEN-I, ”Vuković 1967“, Rudnap and Nova Commodities. Since the beginning of the first phase, around 140 buyers have moved from the EPS to them. Currently, in Serbia, 82 companies have the license for electricity supply. Chairman of the Energy Agency Council, Ljubo Maćić, says that the conditions for obtaining the license are not difficult, so those without experience can also enter this business. ”Among the licensed suppliers, there are those who are linked to foreign companies experienced in this field, but others do not have such background“,Maćić explains, reminding that, according to valid regulations,one license for electricity supply is currently sufficientfor both wholesale and retail trade. By the new energy law which should soon enter the adoption procedure, we [might] go for separate licenses for the wholesale and the retail trade, tightening the conditions for the latter, and thereby also making the consumers more protected, Ljubo Maćić announced.

From the beginning of next year, the electricity market should also become completely open in Bosniaand Herzegovina, Montenegro and Macedonia. For several years already, all Slovenian and Croatian consumers have been entitled to choose from whom they will buy electricity. Last year, the public was particularly interested in the case of the Croatian Electric Power Industry which, under the pressure of competition, lost around 2.000 buyers only during the first few weeks after the market opening for households, after which they had to lower the electricity prices (which, by the way, are almost two times higher than those in our country) by six to seven percent.

Phase Liberalization

In Serbia,the first phase of electricity market liberalization practically began on 1stJanuary 2013, when the right to public supply was abolished for 23 buyers having access to the transmission system, i.e. the high voltage.

In the second phase, started as of 1st January 2014, the right to public supply was left only to small buyers and households, whereas all legal entities and entrepreneurs having more than 50 employees, the annual income higher than 10 million euros and being connected to the medium voltage have been obliged to choose a supplier.

The loss of right to public supply has also involved higher bills for the buyers by around 18 percent on the average in the segment of commercial supply.