Macedonia ignores EU warning on electricity market liberalisation

By bne IntelliNews October 14, 2014

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Macedonia moved a step closer to delaying planned electricity sector liberalisation on October 13, when legislation was approved by the parliament’s energy committee, despite opposition from the EU. 

At a session on October 13, the parliament committee on energy backed government plans to amend the law on energy and delay liberalisation of the electricity market until July 1, 2020. 

Deputy Economy Minister Hristijan Delev told the committee that rather than fully liberalising the market from January 1, 2015 as previously planned, the government plans to gradually open up the market gradually over a five-year period, according to Macedonian news agency MIA. 

Skopje’s change of plan was first announced on October 9, with Economy Minister Bekim Neziri citing research that had shown liberalisation would result in price hikes of between 17.7% and 20% for consumers.

"[T]he price of electricity has a social note as companies pay a little more and the citizens a little less [for] electricity. To us it is important to protect citizens from possible price shock", said Neziri, according to Macedonian daily Dnevnik.

Skopje now plans a more gradual opening of the market that would phase in liberalisation for corporate customers between July 2016 and July 2019, with the entire market to be liberalised by July 1, 2020. At the same time, Macedonia will invest into electricity and gas infrastructure to give consumers a greater choice once the market opens up. 

However, the director of the Energy Community Secretariat, Janez Kopac, warned on October 10 that the move is a “a very clear breach of the Energy Community Treaty”, which aims to bring prospective EU members into line with EU energy policy. 

Kopac questioned Skopje’s claim that prices will rise on liberalisation, warning that, “consumers will be stuck with the incumbent utility EVN, which has a monopoly. This monopoly will be allowed to continue because of the support of the government, which is not looking out for the best interests of the electricity consumers. 

"Such a decision is even less understandable taking into account the fact that the electricity market in FYR of Macedonia for bigger consumers is already liberalised, competition exists and the results are very encouraging for everybody except a monopolistic electricity provider,” Kopac added. 

If the draft law is adopted,  the Energy Community will start infringement procedures against Macedonia at the beginning of January 2015, the deadline for market liberalisation. 

However, Macedonian government officials argue that the country is already ahead of many existing EU member states, as well as non-members from the South-East European region, in terms of market liberalisation. 

“Right now, 44% of the market is already liberalised, placing Macedonia significantly above the European average, and above European Union member countries like Bulgaria, Romania, Croatia and Slovenia. From our region, Montenegro only comes close,” Delev said on October 9.

Back in 2008, Skopje launched a partial opening of the market, allowing large industrial companies to choose their suppliers. In April, this was extended to medium-sized companies - calculated as those with over 50 employees and an annual turnover or total assets of more than €10m. However, extending the new system to households is an important step, since households account for around 50% of total consumption. 

A 2011 IMF report on the sector forecasts that opening up the market “is essential for attracting large-scale long-term private sector investment in generation capacity.” This would help to close the gap between electricity production and consumption in Macedonia, which widened sharply during the last decade. 

Macedonian energy consumption increased by 34% between 2000 and 2008, though it later dropped as the international economic crisis resulted in a fall in demand for products from the country’s electricity-intensive metals and mining sectors. During the same period, domestic supply dropped slightly from 6,326 GWh in 2000 to 6,152 GWh in 2009, forcing Macedonia to spend around €95m a year on power imports, which added substantially to the current account deficit, the IMF says.  

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