State of compliance
The transmission system operator of Albania (OST) was unbundled according to the Third Package ownership unbundling model and conditionally certified in 2017. Following the Secretariat’s Opinion 01/2017, the regulator’s Certification Decision included the obligation to transfer the competences for investment in OST from the Ministry of Infrastructure and Energy to the new shareholder, the Ministry of Finance and Economy, by March 2018. Such a transfer is still not accomplished. After repeated postponements, the deadline is currently set to 15 December 2019.
Unbundling of the distribution system operator was also postponed for the end of 2019. The integrated state-owned utility OSHEE continues to carry out distribution, supply under a public service obligation and supply on the free market. In 2018, OSHEE established three daughter companies to perform respectively the functions of a distribution system operator, a universal service supplier and a free market supplier and trader, and obtained the necessary licenses by the regulator, ERE. However, the assets still remain within OSHEE and the functional unbundling was not completed.
In December 2018, ERE adopted a Decision to postpone the effective application of these licences by twelve months and empowered OSHEE to sustain the provision of corresponding services.
Following the lack of action, in June 2019, the Secretariat stepped up the infringement case opened in January 2018 for lack of unbundling of the distribution system operator by issuing a Reasoned Opinion to Albania for failing to comply or respond to the Opening Letter (Case ECS 04/17).
Access to the system
Access to the system
Third party access to the transmission system and provisions on congestion management on cross-border lines comply with the acquis. Cross-border transmission capacities on the borders with Montenegro and Greece are allocated via the regionally coordinated platform of the South-East Europe Coordinated Auction Office in Montenegro (SEE CAO). The transmission capacity on the 220 kV lines on the border with Kosovo* is allocated through split auction procedures applied by OST and the transmission system operator of Serbia, EMS. The 440 kV interconnection line on the same border commissioned in June 2016 is still not commercially utilized, pending resolution of the dispute and implementation of the agreements between the transmission system operators of Kosovo* and Serbia.
The tariff methodologies are approved by ERE and in December 2018 ERE approved the tariffs for access to transmission and distribution networks and for universal supply for 2019. The prices remained at the same level as in the previous period. Rules and procedures for construction of direct lines have been in force since January 2017.
The Power Sector Law deregulated the prices for electricity generation and wholesale in 2015. However, the wholesale market is not yet fully liberalised. The distribution system operator and supplier OSHEE is still obliged to buy all the electricity that is required to supply customers under universal service and cover losses in the distribution system from a generation company KESH under an exclusive mutual contract and regulated conditions, based on the Council of Ministers’ Decision on public services in the electricity sector. This is in breach of the acquis and represents a major obstacle to the development of competition in the wholesale market in Albania. The contract between KESH and OSHEE was prolonged in March 2019, however, without the approval of ERE.
The establishment of a day-ahead market is delayed. The Council of Ministers was required by the Law to adopt the decision on the establishment, legal form and ownership structure of the Albanian power exchange (APEX) by September 2018. The Council decided on the establishment of APEX, as a separate legal entity established by the transmission system operator OST with initial capital fully financed by this company, only in May 2019. The Decision also provides for the possible entry of shareholders other than OST through a competitive procedure, and outlines the domain of shareholders and structure of the capital. In its related Decision of 11 September 2019, the Council defined the detailed procedure for the selection of shareholders in APEX and allocated responsibilities to the relevant ministries and the selection committee. The Council defined the bidding and selection criteria, procedures and requirements for each individual category of potential bidders from the EU and the Energy Community, including transmission system operators, international market operators, market participants and international financial institutions. The minister responsible for energy shall initiate the competitive selection procedure however the deadline for its initiation is not defined.
The Market Rules for operation of the electricity market following the Market Model and including organized day-ahead and intraday functions were adopted by ERE in December 2017, their full implementation being conditioned by the establishment of APEX.
The final balancing rules that would allow for the full implementation of the requirements of the Law for a market-based procurement of balancing services have not yet been adopted. The transitional balancing rules, adopted by ERE in November 2017, are still in force. Imbalances are settled using reference hourly prices from the Hungarian day-ahead market. Although the rules allow new entrants to the balancing market and potential balancing service providers are available, KESH is still the sole provider. The Law and the Market Model support the possibility for the transmission system operator to exchange balancing services, under market-based conditions, across the borders. This possibility has not been implemented yet.
Via its Dispute Resolution and Negotiation Centre, the Secretariat mediates a dispute between a number of stakeholders, including KESH and the independent hydropower producer Ashta, over the balancing conditions.
In July 2017, ERE adopted rules on publication of basic electricity market data, transposing the Regulation (EU) 543/2013 on submission and publication of data in electricity markets. OST is publishing on its website part of the required data on load, generation, transmission infrastructure and imbalances, while SEE CAO forwards the data on cross-border capacity to ENTSO-E for publication. The REMIT Regulation is still to be transposed by 29 November 2019.
The retail market remains only partially deregulated, due to the possibility given by the Law to all categories of customers, except those connected to high voltage, to continue to be supplied by the last resort supplier, OSHEE, at regulated prices for a period of two years after the technical preconditions for switching are in place. As a result, most of the customers remain at regulated prices, except for a part of the 35 kV customers. This undermines the eligibility right and the interest of new suppliers to enter the retail market.
Vulnerable customers are identified and supported under a legal framework and conditions not related to energy and governed by the Ministry of Social Affairs, which allocates financial support from the state budget. The rules, conditions and mechanisms for compliant support of vulnerable customers, as stipulated in the acquis and transposed in the Power Sector Law, have not been implemented.
A delay in the establishment of the power exchange, APEX, has slowed down the initiative for the coupling of the day-ahead markets of Albania and Kosovo*, pursuant to the Memorandums of Understanding signed between the Governments of Kosovo* and Albania in November 2017 and the transmission system operators and the regulatory authorities of August 2018. The target was to complete the coupling process by June 2019. Another obstacle to the realization of this project is the lack of utilization of the 400 kV interconnection line between Albania and Kosovo*, which is prevented by an ongoing dispute and the missing implementation of the connectivity agreement between the transmission system operators of Serbia and Kosovo*.
In March 2019, the transmission system operator, OST, signed a Memorandum of Understanding with the transmission system operators of North Macedonia, MEPSO, and Bulgaria, ESO, on the development of the electricity market and strengthening regional cooperation through mutual assistance. The operators expressed willngness to couple their national day-ahead markets, implementation of which depends on the completion of the 400 kV interconnection between Bitola and Elbasan.
Another market coupling initiative in the early stages is between Albania, Italy, Montenegro and Serbia. The terms of reference for the project, adopted in January 2018, requests functional national power exchanges in all parties, as well as an established legal and contractual framework and a coherent regulatory environment with no barriers to trade, as prerequisites. No concrete roadmap for the implementation of the coupling has been adopted so far.
The transitional market-based balancing rules adopted by ERE in November 2017 do not prevent cross-border procurement of secondary reserve capacity and energy, however, no such mechanism is applied. Between Albania and Kosovo*, their application depends on the entry into force of the Connection Agreement between KOSTT and ENTSO-E and the completion of the 400 kV interconnection between Bitola and Elbasan.
The allocation of cross-border capacity on the borders with Montenegro and Greece is applied through the regionally coordinated platform of the SEE CAO. The common capacity calculation methodology for the “shadow capacity calculation region 10”, which includes Albania, has been developed and its implementation is pending a recommendation from the Energy Community Regulatory Board, to be adopted in the course of 2019. OST has signed a service agreement with the Security Coordination Centre (SCC) and started the procurement of services in June 2018.
ERE adopted decisions for transposition of the Network Codes on demand connection, requirements for generators and high voltage direct current (HVDC) connection in June 2016, and notified the Secretariat in February 2019. Derogation criteria are not published and implementation has not started yet.