Serbia, Should energy company EPS be privatized?

, News Serbia Energy
Instead of sales, the Electric Power Company of Serbia needs professionalization of system management and a different personnel policy. State ownership is not an obstacle to that, but blind party arrogance

EPS is on the way to becoming a joint-stock company and that is the first step towards its partial or complete privatization. In Serbia, at least when it comes to large systems, the word privatization serves as a euphemism for selling companies to foreigners. It must be that the fans of the sale of everything existing are waiting with delight for that happy moment when Serbia will get another state ballast and, thus refreshed and economically purified, continue on the path of Africanization. In the general chaos, domestic and global, EPS sales may go more smoothly than in some calmer times.

For the government, the sale of EPS could be very pleasant and beneficial. The sale could provide a foreign exchange inflow that would temporarily reduce the gaping budget hole, free the state from the need to invest in the energy sector and borrow on that basis. Instead of a budget outflow – there is an inflow to Serbia. There would perhaps also be private benefits, as is usually the case in “privatization-type” affairs – and not only in “Serbian-type” states. If the government were to go down the path of privatization, there is no doubt that a large number of analysts and “influencers” would support such a decision, either by order of the government, or by ideological affinity, or by order from outside.

There is no shortage of arguments for privatization – privatization would mean the end of the irresponsible attitude towards EPS and personnel policy based on experts from the food and service sector. Parties in power, any government, would lose the ability to pamper their poor and incompetent members at state expense or to enrich “their” private companies at the expense of EPS. Potential problems in the supply of electricity this winter could further strengthen the mentioned argumentation.

This kind of (pro)privatization narrative benefits from the fact that the process of EPS collapse is indisputable and clearly visible. (The dilemma could be whether EPS was ruined only by party charlatanism, i.e. spontaneously, or whether it was the result of a two-decade project to destroy the company in order to reduce its value and then force its sale.) property is a guarantee of the company’s efficiency, or as supporters of the sale of all existing assets would point out learnedly and murderously – isn’t it logical that a private owner takes better care of a company than the state?

It may be that this argumentation is logically lethal, but it is empirically flawed. Electricity or water, for example, are strategic goods where security of supply at reasonable prices is more important than the supplier’s profit interests. We are talking about markets that are natural monopolies and/or function on monopoly or oligopoly principles. And when the market environment is like that, there is no market competition from which consumers would benefit. On the contrary, it is in the interest of the company and its private owners to raise the price of electricity sky high, while investing as little of the profit as possible in the development and strengthening of security of supply. Owners prefer to invest in their own pockets. All failures and omissions will always be compensated by suppliers either by raising prices again or by forcing subsidies from the state. It is naive to believe that regulatory agencies, which are supposed to look after the interests of consumers.

The experience of France is a good and instructive example. Fifteen years ago, one of the world’s strongest electricity companies decided to follow the path of its Anglo-Saxon role models. A partial privatization was carried out, which was supposed to ensure that EDF – the pride of France – would be an even more successful company. EDF has “strengthened” so much that today more than half of the nuclear power plants (which is the main source of electricity in France) are out of order due to corrosion and poor maintenance. France went from being an exporter of electricity to an importer, and at the worst time. The epilogue of that story is that the French state is ending the renationalization process of EDF these days. As the French Prime Minister explained, in conditions of dramatic climate change, the country must have full control over its energy future.

But how to reconcile the advocacy for the energy system to remain in the hands of the state, when the state mismanages the EPS? The answer is simple – the professionalization of system management and a different personnel policy are needed. State ownership is not an obstacle to that, but blind party arrogance. Public pressure not to sell EPS – but to professionalize it – would have to be systematic and persistent. It would also be a good opportunity for the opposition to show that it is not an instrument of foreign economic interests from any part of the world.

Finally, but extremely important – at the start, we should also forget any idea of ​​public-private partnership as a supposedly constructive compromise when it comes to the reform of state monopolies. That model always ends at the expense of the state partner, it is the worst of all bad models and is even worse than privatization. Even liberal developed countries no longer fall for such ideas, Standard writes.