Serbia prepares for opening of the electricity market, big consumers to select the supplier in 2013

7. December 2012. / News Serbia Energy

Energy Law stipulates that buyers who take electricity from the transmission system up to the January 1st 2013 need to choose a supplier and agree with him on the quantity and price of the electricity – Transmission services remain regulated – EPS offered further business cooperation.

Last summer, PE “Electric Power Industry of Serbia” and its subsidiary companies for distribution reminded in writing all the customers who take electricity from the transmission system, ie.the qualified buyers in Serbia, that their status, from January 1st of the upcoming year, would be changed and offered them to start negotiations with EPS as supplier of choice for the future. In all respects, that was a new page in the history of mutual business relations, which,with many of them, lasted several decades and in which mutual cooperation was correct. Of course, with the exception of those who are “stuck” in the process of restructuring and remained a burden on themselves and creditors, and above all, a burden on the state.

Nevertheless, customers stunned

Recently, especially during this month, the concrete negotiations, with the most of the major customers havebegun. They have expressed their desire to keep the EPS as their supplier, but, as we have found out, they did not hide their expectations that they would gain benefits in the old, good EPS, such they could not hope for with other licensed suppliers in Serbia. Moreover, it was heard that some of them were completely taken by surprise when they had learned that they would not have the electricity price on the tariff system, but the market price, and that, for the customers of the high voltage, the electricity market in Serbia would be opened in just over a month, that is, without prolonging the period. And market laws rule on the market: negotiations with the clearly defined price, terms and all mutual rights and obligations.

This lack of knowledge of the future participants in the open market is certainly not the determinant key of total activity that is conducted according to the preparation plan for the successful start of the new relationships in the purchase of electricity on the home soil. However, it seemed to us that this plan was very illustrative, since those who were familiar with the essence of the new legislations warned last year that we must not allow that 2013 arrives and that some customers do not understand what the new law requires. It has been listed then what needs to be done and how to prepare the company’s suppliers and customers, but… it has been delayed with the adoption of the Rules of Procure of the market, changes and additions of the rules on the transmission and distribution system, and then with the adoption of various laws and regulations, so that, by all account, the doors of the market will open and that some important questions will still wait for the answers. For example, it still hasn’t been decided who can be the spare supplier in Serbia for those customers who fail to agree on the supply before the given deadline.  The law allows them to rely on the reserve, up to 60 days, and such law is not yet in sight. Could it be that the market creators hope to secure the EPS as safe player in each version?

-“Electric Power Industry of Serbia” has a potential to accept the role of a spare supplier for those who can’t manage in the first months, but that decision must be made by the organs in charge- saysfor our newpaperMiladinBusarić, Assistant Director of EPS for Electricity Trade, who, together with Mijat Milošević and David Žarković, from the Department for electricity trade in this Directorate, lead intensive conversations with the customers who are not eligible for public supply from January 1st 2013.

He points out that there are mutual interests of current business partners to conclude a contract on purchasing of the electricity. On one side, there is legitimate commercial interest of the EPS to conclude a contract on electricity sale that is close to the market price with all, or nearly all customers whose facilities are connected to the transmission system.  On the other side, there is the interest of qualified customers to keep the EPS as their supplier in the new market conditions. They have built such commitment based on its good cooperation with the EPS, correct relations and, in particular, relying on the security that is given to a supplier or even customer by respectable production facilities, such as the one in the EPS.

Basarić says that the release of qualified buyers from the tariff system, and their transition from regulated to market electricity prices,is the first major step in opening up our domestic market. After one year, only households and small consumers will have the right to public supply (regulated price), while all other customers will have to choose the supplier and byu electricity on the market. From January 2015households and small customers will also gain the right to choose their suppliers, but they will still retain the right to public supply, if they do not choose another supplier.

– The first step in opening the market proved qualified buyers to be very difficult. The truth is, that should have been expected. The transition from regulated to market price for the most qualified buyers means, essentially, getting a significant increase in electricity prices, and that increases the overall cost of doing business. In fact, most of our customers was not clear until our conversations that in addition to the price of energy they would have to pay the balance and cost of electricity transmission – Basarić says.

EPS guarantees safety

Stating that “Electric Power Industry of Serbia” strives to maintain 100 percent of its stake in the sale of high voltage electricity, which is about ten percent of the total investments in the territory of Serbia, our source says that the EPS is ready to guarantee security of supply for each customer with a signed contract.

– EPS has nurtured such practice for decades, and has been proved in the most difficult energetic circumstances- highlights Basarić.

He does not want to reveal whether and how much the large byers were surprised by the price of electricity that they were offered offered by EPS from the new year, as has been overheard, because he says that it is a trade secret and a matter for negotiation. He notes that it appears that some had hoped that, as far as EPS is concerned, opening of the market only means a change of form, not substance. In other words, they wrongfully assumed that the current tariff customers would keep the tariff rates.

When we asked how to calculate costs of energy transfer since these prices remained regulated, unlike the price of kilowatt-hours which is free and released under the influence of market forces of supply and demand, our source said that it depends on whether the buyer would sign the contract on complete supplying or not.

– With a full supply contract, EPS offers customers one price, which has included price of kilowatt-hours and balancing cost, and transmission cost is calculated based on the account sizes and list prices applicable for power transmission. To explain, the contract on complete supplying involves withdrawal of energy in case the customers need to and when they need to, and the bill is issued on the basis of measurements of the amount of energy – Basarić explained.

Another question was inevitable: how to end a business relationship with qualified buyers who are not able to settle their debts to EPS?

– Energy Law stipulates that all payment obligations are regulated in accordance with the existing supply contract before changing the suppliers. Proceeding from this, EPS suggested that a new supplier and customer contracts should be signed by November 30th, and that customers should deliver to EPS before a signed confirmation that they have paid all debts or certificate of regulating the debt with the company that now supplies them – Basarić said.

Not the form but the essence

– Legislative changes are not just a form for EPS. On the contrary, they are essential for the profits and good operations of the company, which can only be created through a more significant market share and corresponding prices. We have no reason to offer cost-kilowatt-hour below the current market – says Basarić.

Source Serbia Energy Magazine

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