Gas

State of compliance

Bosnia and Herzegovina stands far away from adopting a state law, which would regulate the gas market and transpose the main Third Energy Package requirements. The country is subject to several infringement cases in this context as well as penalizing measures by the Ministerial Council since October 2015. 

The adoption of a new draft gas law has been stuck in Parliament.   The Federation of Bosnia and Herzegovina was not willing to move ahead without a consensus on broader institutional competences at the state level, and Republika Srpska has meanwhile adopted a completely independent Law on Gas at the entity level, putting the state law completely aside. Only recently, there are positive movements with respect to the acceptance of the state draft law by Republika Srpska.

This results in a situation where one-half of the country has in general transposed the Third Energy Package in the gas sector, whereas the other half did not transpose virtually anything. The Federation of Bosnia and Herzegovina continues to apply a 2007 governmental decree, which fails to transpose any key principles of the gas acquis.

There was no genuine progress during the last year, except for a few secondary acts adopted by the entity Regulator in Republika Srpska.

 

  • Unbundling

    Unbundling

    Bosnia and Herzegovina is not compliant with the Third Energy Package’s unbundling and certification requirements.

    However, at the entity level, Republika Srpska successfully transposed the unbundling and certification requirements in line with the gas acquis on its territory by the adoption of a primary energy law and a Rulebook on certification adopted in March 2019. The relevant institutional competences are assigned only to the entity regulator and the Secretariat, completely omitting any reference to state-level institutions. Sarajevogas Istocno Sarajevo, performing both transmission and supply of natural gas in Republika Srpska, and Gas Promet, responsible for transmission system operation only, remain neither unbundled nor certified.

    The legislation of the Federation of Bosnia and Herzegovina remains non-compliant, with BH Gas, the importer for the entire entity, remaining fully bundled, not even satisfying the unbundling requirements of the Second Energy Package.

    In both entities, distribution activities are performed by the same companies engaged in the supply and trade of natural gas. Republika Srpska allows an exemption for the unbundling of distribution system operators with less than 100.000 customers connected to the grid. The Federation’s legal system is silent on this and thus the unbundling of distribution operators  is non-compliant.

  • Third Party Access

    Third Party Access

    Bosnia and Herzegovina is not compliant with the third party access provisions of the gas acquis on many accounts.

    The legislation of the Federation of Bosnia and Herzegovina envisages negotiated access based on decisions of the Ministry in charge of energy. Gas transmission and distribution tariffs in the Federation were never adopted, published or applied. There is also no regulatory authority with the necessary competences in place.

    In Republika Srpska, the Law on Gas requires that the transmission tariff methodology, aligned with the Third Package principles, is adopted by the entity regulator, which also sets the tariffs.

    At present, the tariffs are applied for a spur of the transmission pipeline Karakaj – Zvornik, whereas the entity regulator is finalising the tariff setting procedure for the main pipeline, Sepak – Karakaj.

    Republika Srpska transposed the relevant provisions on capacity allocation, transparency and congestion management from the Third Package. At present, the transmission network code of Gas Promet provides for allocation of both long- and short-term capacity on a firm and interruptible basis.  Gas Promet partly publishes the information required by the transparency rules.

    In practice, no third party access is granted to market participants other than the incumbent suppliers on any of the transmission networks.

    Republika Srpska’s Law on Gas defined third party access services of their transmission system operators. The exemption procedure is compliant with the Third Energy Package. The rights to construct a direct pipeline were defined by the Rulebook on direct pipelines approved by the Regulator in March 2019.

    In the Federation, a third party access exemption procedure is not compliant with the gas acquis – the exemption decision would be issued by the responsible Ministry without involving any regulatory authority or the Energy Community institutions.

  • Wholesale market

    Wholesale market

    The gas market of Bosnia and Herzegovina is illiquid. Bosnia and Herzegovina’s market is divided into two separate entity markets, which are both foreclosed. The domestic incumbents BH Gas and Energoinvest are parties to an import contract with Gazprom, which is renewed annually. Neither an organized exchange nor any other trading platform is in place.

    Deregulation of the wholesale market prices is not  implemented in the Federation.

    Federation of Bosnia and Herzegovina did not transpose any balancing provisions of Regulation (EC) 715/2009. In Republika Srpska, Gas Promet performs balancing under a Rulebook on the Operation of Natural Gas Transmission, but the balancing rules stipulated therein are not market based and thus not compliant.

  • Retail market

    Retail market

    Customers in the Federation of Bosnia and Herzegovina are still captive, which is a serious breach of the Treaty. The eligibility provisions, stipulated by a government decree, define the eligibility status on the basis of consumption levels or limit it to customers that use gas for the generation of electricity.

    Republika Srpska, on the other hand, correctly transposed the eligibility criteria. All natural gas consumers in the Federation of Bosnia and Herzegovina are supplied by their respective incumbent at regulated prices. In Republika Srpska, there are different suppliers, and regulated prices remain only for household customers. The regulator adopted the Rulebook on supplier switching in April 2019, defining the rights and obligations of market subjects active in supply.

    Bosnia and Herzegovina has not transposed provisions related to customer protection and vulnerable customers as required by Directive 2009/73/EC.

    The existing legislation of Federation of Bosnia and Herzegovina introduces certain elements of the socially vulnerable status of customers by defining protected customers. It imposes obligations for the supplier of tariff customers as a manner of customer protection, which is not compliant with the acquis.

    Republika Srpska transposed the customer protection provisions by the Law on Gas.

    Neither entity performed any competitive procedures when determining the suppliers of last resort i.e the suppliers with public service obligations, though Republika Srpska’s Law requires such a procedure.

    Republika Srpska sets security of supply standards, whereas they are missing in Federation of Bosnia and Herzegovina.

  • Interconnectivity

    Interconnectivity

    Bosnia and Herzegovina is situated at the end of supply route. The only entry interconnection point has sufficient annual capacities for the needs of the whole country and is significantly underutilised except for peak winter daily supplies. Nevertheless, the access to natural gas is very limited in Bosnia and Herzegovina. The country’s entities have very ambitious plans to increase their internal transmission network. However, the projects are in initial phases only due to lack of accord between the entities and absence of an acquis-compliant regulatory framework.

    Gas Promet Pale holds an interconnection point with Srbijagas with many provisions from the Network Code on Interoperability and Data Exchange, albeit none of them was updated after the deadline for the implementation of the Interoperability Network Code expired in October 2018.