Serbia: What does the electricity market liberalization mean for state power utility company EPS?

Published on 7. April 2014., News Serbia Energy

Is the level of awareness and responsibility about the coming changes high enough on the medium lines in EPS and who will be “guilty” for turbulent times? The process of the electricity market liberalization in Serbia is still in process, this process is part of a package of reforms that Serbia must implement as part of the contractual obligations under the Energy Community. The process of harmonization in the energy sector is the first EU process which Brussels has begun in the Balkans. Certainly in order to strengthen its own market, to assist the cohesion process in the region but also to raise the existing capacity in the region.

The issue of energy supply security, which also includes increase of number of the supply sources, is a key issue for the EU, and therefore for the countries in the region. EPS as the most important actor in Serbia, from the position of the energy sector and supply security, has a special place in this process. At the same time EPS as one of the participants in the liberalization process also becomes one of many market participants. Much has been written about the importance of the process of electricity liberalization in Serbia, about phases and current effects as well as projected process effects on EPS and the users – the customers.

One of the parallel processes that are imperative in the overall reform cycle in the energy sector is the process of competition introduction in the electricity market. Watching through the prism of EU competition policy certainly has helped the electricity market development in the developed markets in the EU. But the regional example should be considered with special care especially bearing in mind that this process also passed some other Eastern European countries. Looking at the closest example from practice it can be seen in Croatia that the former monopolist has not been accustomed to the new role.

Confusion of management, marketing services but also lack of awareness about the monopoly loss in the electricity delivery to end-users has led HEP in the situation to lose some consumers within a few weeks, with growing trend of consumer groups’ loss. Competition has prepared its entry into the market dominated by HEP for almost a year, carefully analyzing the weak links and features of HEP sleeping giant. Aggressive marketing campaign, which was in progress before the start of liberalization, two competing companies have benefited precisely on the platform of perceived weaknesses of the HEP system.

About the working processes in private companies of electricity traders certainly do not need to talk because the differences and the value system are too great compared to the state systems such as HEP. What was essential to some extent for new entrants is strategically promoted a new relationship with the customers, the new system of values ​​and modes of behavior to consumers. And precisely HEP came to similar conclusions in their analysis, namely the internal disorganization and lack of timely preparation caught HEP unprepared for the aggressive campaign competition.

It is certain that Serbia and Croatia cannot be compared, and certainly the EPS and HEP cannot be compared. On the contrary, the Serbian market is far more interesting for the big players and new electricity suppliers to end consumers. Concessions and competition strategies may be far more complex and meaningful. On the other hand EPS is a far larger and more powerful energy system than HEP; however the size brings greater slowness of the system. A sleeping giant -EPS is somewhat aware of the changes that are coming.

New management introduced a new value and quality in working processes. The formal steps of activities separation were completed, with which were met legal requirements in the market regulation. However, the question is whether the center lines of operational management are sufficiently aware what actions and steps need to be prepared for the participation on market. Growth in electricity prices will further disrupt the EPS market position and EPS asks for an increase in the electricity price in order to meet depreciation and investment needs.

Given the EPS importance for the Serbian economy and for the state of Serbia in general, the question is whether is EPS aware of the seriousness of the upcoming process and its effects?

Source; Serbia Energy