Serbia: Power utility EPS under pressure from IMF to increase the electricity price

5. January 2016. / News Serbia Energy

The experts say that the reason why IMF and World Bank insist on the market price in Serbia is so that international energy companies could come to do business and to make profit here, because with these prices it is not profitable. EPS still has no competition. Memorandum with IMF envisions higher electricity prices, says Branko Kovačević, president of the Supervisory Board of EPS power utility company ( Elektroprivreda Srbije).

It is clearly stated in the Memorandum with IMF that the price of electricity will go up in May 2016, and if neccesary additional price harmonization will take place in 2017. The goal is for the electricity price to come closer to the market price says in this document.

So far there are no official announcements that the prices will go up. Again this year, the officials hesitated to deliver the news that electricity will be more expensive, but they could not have postponed the price hike. Initially it was stated in the Memorandum that electricity price would go up on April 1, 2015. State officials rejected the news and postponed the increase in electricity price for months. It finally happened on August 1, when the electricity price increased for 12 percent.

If „Elektroprivreda Srbije“ would collect all debts from large industrial consumers (according to data from EPS industrial consumers owe them 165 million euro), debts from KiM, where electricity has not been payed for since the Second World War, and charge for all the electricity that has been stolen, there would be no need for the price to go up regardless of the Memorandum with MMF says professor Branko Kovačević, head of Supervisory Board in EPS.

-Decision whether the price of electricity would go up or not, will be brought by the Government and the Ministry of Energy, in accordance with Agency for Energy. EPS has no say in this, so that is why we have not disscussed it in the Supervisory Board meeting.

The fact that electricity has not been cheaper in the Stock market in the past decade than it is now is all the more reason for the Government not to proceed as it is said in the Memorandum. Also it is a fact that this year the Government refused to increase the price of electricity like IMF demanded so the Government can do it next year as well.

-IMF demanded the price to be twice as high than the previously determined increase. Unlike IMF the Government took into consideration the budget of our citizens, Kovačević claims.

If the price of electricity goes up next year the main reason would be that EPS would invest into eco-friendly new technology for electricity production.

Current production of electric power from lignite is harmful for the environment. That calls for new and expensive investments into environmental protection which will have to be covered from the increased electricity price, because the production would be pricier than now, Kovačević explains. The burning issues for EPS now is too large a number of employees, that have to leave EPS in 2016, he said and added that it is why they are talking to unions daily.

The Supervisory Board recently removed the EPS long-term business plan from the agenda because it envisioned shutting down the power plants and lay offs, without informing the unions and SB.

Electricity traders agree that with these stock market prices the price of electricity does not have to go up, so it is expected that the price will be under 41 euro per MW through out the entire year.

This can be an argument for the Government to refuse the demand from IMF to increase the price of electricity in 2016, says our source and adds that when half a year ago, he analysed the price of kilowatt for households with the average consumption, the calculation shows that the price of electricity was 30% lower than the market price in that period (in the meantime the price went up). That is the main reason why not one household in Serbia has not changed the supplier, and they are still buying electricity from EPS.

Considering that the price of megawatt in the Stock market ranges from 45-46 euro, and that seven or eight years ago the price was 90-93 euro, counting in kilowatts, without paying for the network, the price of electricity for households would be 0.46 euro cents, which is not far from the market price.

The experts say that the reason why IMF and World Bank insist on the market price in Serbia is so that their energy companies could come to do business and to make profit here, because with these prices it is not profitable. EPS still has no competition, transmits

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