Serbia: The market liberalization process, electricity price will gradually be higher

14. December 2016. / News Serbia Energy

What does the process of market liberalization imply for the households in Serbia. Kilowatts in private companies more expensive.  EPS will also have to compete with them.

Latest affair in EPS regarding the sale of electricity to large companies returned the story of the electricity market liberalization in Serbia in the spotlight. Namely, although citizens have the feeling that it is only possible to purchase electricity from the “Electric Power Industry of Serbia”, for several years companies and industrial plants must choose supplier themselves from whom they will purchase kilowatts. They can purchase electricity from 59 different companies. According to experts, the long-term goal is to purchase electricity in Serbia just like internet, cable TV, mobile phones… However, at first, it means – increase in prices for the small customers.

From a total of 59 electricity retailers, and 37 of them having the license to trade with each other, only seven to eight companies are active in Serbia.

– About 45 companies contacted the Energy Agency in Serbia wishing to engage in a specific work with electricity trade – says Ljiljana Hadzibabic, a member of Energy Agency Council of Serbia. – Only 15 of them are involved in supplying end-customers with electricity, large scale consumers. Therefore, EPS is still far more dominant than others, but the market is expanding every year.

Hadzibabic adds that in order to purchase electricity and other services from different suppliers, it is essential that customers are interested for the market.

Small customers, or households in Serbia are still being supplied with electricity in the regulated market. This means that they are still being supplied by EPS at the price that is public and applies to all households.

– Households will purchase electricity in the open market when the price of kilowatt they are buying from EPS reaches the price that is now in the market – says Hadzibabic. – We have a situation for years that the electricity price for small customers is a social category. In addition to maintaining the social peace, the problem for private companies could be ensuring security of supply for all households. That is why, each year starting from the next, the Agency will prepare the analysis about the possibility to open the electricity market for households.

Unlike them, companies get individual offers for the price of kilowatt and it is confidential and may be different. Every electricity supplier has the right to offer the other company the price that it considered to be economic price.

However, Hadzibabic still adds that the market opening for small customers “may not suit us after all, because the price will probably be higher than it is now”.

The company GEN-I from Slovenia is one of the first suppliers who came to Serbia to “offer” electricity. As soon as they came, a large client, the German “Messer” was “confiscated” from EPS.

– The calculation is such that switching to another supplier pays off to companies if they are consuming a lot of electricity – says Srdjan Resavac, GEN-I Regional Manager. – Thus, those who consume more than 1,400 kilowatts per month can get a good offer by other suppliers. We also supply small customers, but it also pays off for them only if they consume more electricity. The average household consumption in Serbia is about 450 kilowatts per month, so the percentage of those who spend 1,400 KW is only 0.5 percent.

Beside electricity is offered by a large number of companies, EPS is the only major producer of electricity in the country, in addition to small amounts of electricity in NIS. Therefore, other companies are actually only resellers. Anyhow, according to the model situation in telecommunications industry, it is profitable for the companies to work even when using the resources of others.

Use new market

Almost 96 per cent of all consumers, despite the possibility to choose another supplier, remained with EPS. However, news about the latest fraud is related to the adjustment of this public company to liberalization of free trade. Namely, as some officials in “EPS Snabdevanje” have been adjusting decimal numbers of electricity sale offers for the past year, EPS was more expensive than some private companies and even 169 companies abandoned the supplier.

Among the companies that abandoned “Electric Power Industry of Serbia” are many municipalities and courts, hospitals, universities, schools…

First jump, then fall

When the electricity market opens, households will face kilowatt price increase. However, according to Dragan Vlaisavljevic, Executive Director for Electricity Trading in EPS, the wholesale electricity price has dropped dramatically in recent years.

– This means that the price of electricity for customers would probably first rise dramatically, and then it would begin to fall, under the influence of open purchase and sale. In recent years, Croatia had similar situation, when its main power supply company, HEP, under the pressure of other suppliers that were offering lower price, had to drop offer for the households – says Vlaisavljevic.

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