State of compliance
The legal setup for operation of the electricity transmission in Bosnia and Herzegovina does not transpose any Third Package compliant model for unbundling of the transmission system operator. The independent transmission system operator NOS BIH and the transmission company Elektroprenos are legally unbundled but still controlled by the entity governments who are also responsible for the operation of the state-owned generation and supply utilities.
In both power utilities of the Federation of Bosnia and Herzegovina, restructuring is delayed and distribution remains bundled with generation. The five distribution system operators in Republika Srpska are bundled with supply and the revised Electricity Law fails to foresee a deadline for unbundling. The utility of Brčko District is exempted from the obligation for legal unbundling but still needs to meet the obligation for full unbundling of accounts.
The Third Package obligation to appoint a compliance officer and adopt a compliance programme is not applied in any utility in Bosnia and Herzegovina.
Non-compliance with requirements for the unbundling of distribution system operators throughout Bosnia and Herzegovina is subject to an infringement procedure initiated by the Secretariat in January 2018 (Case ECS 05/17).
Access to the system
Access to the system
The Law on Electricity Transmission, Regulator and System Operator of Bosnia and Herzegovina transposes basic requirements of the Third Energy Package. Secondary legislation approved by SERC de facto governs third party access to transmission. The Grid Code of 2016 provides a framework, while the Rules for connection to the transmission network, amended in 2017, further define the administrative procedures. Nevertheless, the current rules fail to reach full compliance. New rules are expected to include the requirements of the relevant Network Codes and Guidelines.
While the Law itself does not provide compliant provisions for the allocation of cross-border transmission capacity, compliant rules were adopted by SERC. The lines to Croatia and Montenegro are allocated on a yearly, monthly and daily basis through SEE CAO. Bilateral allocation is applied on the border with Serbia and for intraday allocations on all borders.
The rules governing the access to the distribution networks are transposed and implemented in line with the acquis.
The price of electricity supplied by the incumbent generation companies to public suppliers under the universal service provision continues to be regulated in Republika Srpska. This is a breach of Energy Community law. It has not been addressed by the draft Energy Law of that entity. In the Federation of Bosnia and Herzegovina, wholesale prices are not regulated.
The Market Rules approved by SERC in 2015 provide a general framework for wholesale trading and indicate the need for establishment of physical day-ahead and intraday electricity markets. The current legal framework, however, does not define competences for establishing such a legal entity, which prevents the setting up of the organized market in Bosnia and Herzegovina. Nevertheless, preparatory activities for the establishment of a day-ahead market could commence even before the adoption of the new Law, following recommendations from the WB6 connectivity programme technical assistance.
The three incumbent utilities, each with its own generation portfolio remain focused on their respective local areas of operation, despite the fact that there are no legal or regulatory obstacles for more competitive conduct.
So far, only the power utility of Republika Srpska is trading on an organised day-ahead market.
The Market Rules provide for market-based procurement of balancing services, allowing NOS BIH to operate a competitive balancing market in Bosnia and Herzegovina, including balancing reserve capacity and balancing energy. In September 2017, SERC adjusted the prices of secondary and tertiary control and introduced simplified calculation on an hourly basis, which increased the liquidity of the balancing market.
Regulation (EU) 543/2013 on submission and publication of data in electricity markets is not transposed. Nevertheless, NOS BIH is further developing its software for the provision of data to ENTSO-E's transparency platform to comply with the Regulation and the provision of data on balancing services is in testing phase.
According to the legislation of Bosnia and Herzegovina, electricity prices are deregulated for all final customers except households and small customers. There is no legal enforcement or plans for phasing out remaining price regulation. The regulatory commissions in both entities need to reduce the cross-subsidies between commercial customers and households, estimated at an average of 25% in 2017.
NOS BIH purchases the energy for network losses on the balancing market.
There are no legal or regulatory obstacles for licensed suppliers to freely trade and operate throughout Bosnia and Herzegovina and all customers can effectively switch to a supplier of their choice. The number of eligible customers that have switched from regulated supply to a competitive supply is increasing. However, all dominant incumbent suppliers are still offering their services only to consumers within their local area of operation, with no effective competition across Bosnia and Herzegovina. No incentive measures to improve competition in the retail market are imposed by the regulators.
Supply of last resort is available for a period of two months to eligible customers supplied on the market in case of bankruptcy or revocation of the license of their supplier, or unsuccessful switching. In Republika Srpska, the service can be extended to 12 months. In both entities, the incumbent suppliers are tasked with the supply of last resort in non-market-based procedures.
Provisions for overall customer protection are transposed in the entity laws. There is no coherent definition for vulnerable customers. They are defined only in the Federation of Bosnia and Herzegovina but the support depends on the incumbent utility. In Republika Srpska such measures still need to be adopted.
Establishment of a national day-ahead market has stalled, and the same obstacles are blocking activities at the regional level. The roadmap for regional day-ahead market integration in Western Balkans indicated the prospects for market coupling of Bosnia and Herzegovina with Croatia, Montenegro and Serbia. The Croatian power exchange CROPEX expressed an interest for market coupling with Bosnia and Herzegovina. However, Bosnia and Herzegovina has not decided on any particular market coupling activity yet.
The current legislation does not prevent acquiring balancing services across borders, and the provision or procurement of such services is included in the draft Law on Regulator, Transmission and Power Market. Market-based procurement of balancing capacity and balancing energy is further defined by the market rules adopted already in May 2015.
NOS BIH exchanges balancing services (manually activated frequency restoration reserve) with the transmission system operators of Croatia and Slovenia since 2016 and with Serbia as of December 2017. An agreement on the exchange of balancing energy with the transmission system operator of Montenegro was approved in March 2018.
NOS BiH is a shareholder in SEE CAO through which common capacity auctions are performed for the interconnection capacities on the borders with Croatia and with Montenegro. The border with Serbia is coordinated bilaterally. NOS BiH is a shareholder of the Security Coordination Centre (SCC), however, a coordinated capacity calculation is still missing.
A set of Connection Network Codes were transposed by the decision of SERC adopted in June 2018. According to the decision, a final deadline for the implementation will expire on 12 June 2021.