State of compliance
The currently applied legislation dating to 2008 does not provide a framework for compliant unbundling of the transmission system operator. The draft Law on Regulator, Transmission and Electricity Market and the complementary law on the establishment of a transmission system operator for electricity, both aiming to transpose the Third Package at the state level, have not been adopted. In practice, the entity governments, who are responsible for operation of the state-owned generation and supply utilities, control the independent system operator NOS BIH and the transmission company Elektroprenos.
The Law on Electricity in Federation of Bosnia and Herzegovina provides for unbundling of the distribution system operator, but has not been implemented. Unbundling of the two integrated utilities in this entity is pending adoption of their restructuring plans.
In Republika Srpska, the five distribution system operators are bundled with supply, and the current Electricity Law fails to foresee a deadline for unbundling. A new draft Electricity Law transposes unbundling provisions in compliance with the Third Package, however, a deadline for its completion is not envisaged. The draft Law was submitted for adoption in July 2019. To date, it is in its final public hearing procedure, pending adoption by the entity Parliament.
The communal utility of Brčko District is exempted from the obligation for legal unbundling, but has not met the criteria for the unbundling of accounts.
The Third Package obligation to appoint a compliance officer and adopt a compliance programme is not applied in any of the utilities in Bosnia and Herzegovina.
The lack of full transposition and the missing legal and functional unbundling of the distribution system operators throughout Bosnia and Herzegovina are subject to an infringement procedure (Case ECS 05/17).
Access to the system
Access to the system
The existing legal framework allows for non-discriminatory and transparent third party access to electricity infrastructure. Compliant tariff methodologies for system operation and transmission services are applied since 2014 and 2016 respectively. The state electricity regulatory commission, SERC, approved the corresponding tariffs for 2019.
In June 2018, SERC adopted a Decision on transposition of the Connection Network Codes on demand connection, requirements for generators and grid connection of high-voltage-direct-current (HVDC) systems and power part modules. Some of the provisions need to be transposed and adopted through acts under the responsibility of the regulatory authorities of Republika Srpska and Federation of Bosnia and Herzegovina. In the SERC Decision, the regulatory authorities of both entities are called upon to ensure compliance of the relevant acts implementing the Connection Codes in their jurisdictions.
By the Decision, SERC obliged NOS BIH to develop and submit for approval a new Grid Code and updated rules that shall enforce the application of the provisions of the Connection Network Codes with relatively short deadlines. In September 2018, SERC approved the new Grid Code transposing the provisions under the jurisdiction of SERC such as the preparation of planning documents, connection procedures and applied standards including voltage levels for normal and contingency operation. In February 2019, SERC adopted rules on the Connection Network Codes implementing conditions for derogations and exemptions for emerging technologies, followed by decisions on the criteria and the procedure for application of derogations.
While the Law itself does not provide compliant provisions for the allocation of cross-border transmission capacity, auction rules were adopted by SERC and are implemented. The lines to Croatia and Montenegro are allocated on a yearly, monthly and daily basis through the SEE CAO. Joint bilateral auctions are applied on the border with Serbia. Bilateral intraday allocations are implemented on all borders.
In Federation of Bosnia and Herzegovina, wholesale prices are not regulated, whereas in Republika Srpska they have not yet been deregulated. According to the current Electricity Law in Republika Srpska, the price of electricity supplied by state-owned generation companies to suppliers for the supply of consumers under a public service obligation is regulated. To date, the new draft Electricity Law, expected to deregulate these prices, is still not adopted.
The Market Rules approved by SERC in 2015 provide a basic framework for wholesale trading and do not prevent the establishment of an organised electricity market operator. However, the state Law does not define competences for establishing such a legal entity, which prevents the setting up of the organized market. The stakeholders in Bosnia and Herzegovina did not apply the recommendations of the WB6 connectivity programme technical assistance to commence the establishment of a day-ahead market before the adoption of the new Law.
Competition on the electricity market is dominated by the incumbent utilities whose trading activities are mainly limited to their respective areas of operation. For the time being, only the incumbent utility of Republika Srpska is trading on an organised day-ahead market.
The balancing market is the most advanced market segment in Bosnia and Herzegovina, with competition taking place between four utilities and one industrial customer. The Market Rules of 2016 allowed the independent system operator NOS BIH to operate a competitive balancing market on the overall territory of Bosnia and Herzegovina, including both balancing reserve capacity and balancing energy. The balancing mechanism is continually improved, and the rules were amended in 2018 to meet the diversification of services and types of bids and nominations.
Regulation (EU) 543/2013 on submission and publication of data in electricity markets is not transposed in the primary law. Nevertheless, NOS BIH is developing its software platform for the provision of data for publication to the ENTSO-E's transparency platform.
Electricity prices are deregulated for all consumers except households and small customers in both entities and Brčko District. Cross-subsidies between households and commercial low-voltage customers within the universal service are still around 25% on average.
The retail market is liberalised. There are no regulatory obstacles for all licensed suppliers to provide services on the territory of Bosnia and Herzegovina and all customers can effectively switch to a supplier of their choice. Most of the customers are still supplied by their incumbent suppliers, even though the number of eligible customers that have decided to switch their contracts from regulated supply to competitive supply is continuously increasing. Apart from the dominant incumbent utilities, which are still not present outside their local area of operation, four additional companies provided close to 15% of the electricity supply in 2018.
Supply of last resort is provided for a period of two months to eligible customers without access to universal service, in case of bankruptcy or revocation of the license of their supplier, or unsuccessful switching. In Republika Srpska, the service may be extended to twelve months. If the supply has been curtailed due to non-payment. The service is not granted before the settlement of arrears. In both entities, the incumbent suppliers are appointed as suppliers of last resort in non-market-based procedures.
Provisions for overall customer protection are transposed in the entity Laws. There is no coherent definition of vulnerable customers. In Federation of Bosnia and Herzegovina, the support depends on the incumbent utility. In Republika Srpska, such measures still need to be included in the energy legislation.
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.