State of compliance
Unbundling of the transmission system operator has not yet been finalised in compliance with the Third Energy Package according to the Opinion of the Secretariat, as affirmed by the European Commission. Since August 2017, when the national regulatory authority AERS certified the transmission system operator EMS as compliant with ownership unbundling rules of the Third Energy Package, AERS has not taken actions to reopen the certification procedure in order to allow the Secretariat to take into account an amendment to the Law on Ministries, made after the issuance of the Secretariat’s Opinion 03/17 issued on 15 June 2017. Following the receipt of additional information from AERS on 7 May 2018, the Secretariat concluded that EMS is still not unbundled in a compliant manner because the changes in the legal framework concerned only task to make “proposals for acts on appointment and dismissal” while the final decision-making remains with the Government. The European Commission asked ENTSO-E to contact EMS and the Secretariat to solve the identified problem in order to avoid a potential suspension of the participation and/or voting rights of EMS in ENTSO-E.
Legal unbundling of the distribution system operator EPS Distribution from supply has been finalized, however, functional unbundling has not been completed yet. Consequently, the issuance of the license for distribution system operation by AERS is still pending. The annual compliance report of 30 June 2017 concludes that independence of the distribution subsidiary of EPS in terms of organisation and decision-making still does not exist and that the compliance programme is still not implemented. Rectifying this breach requires amendments to the founding act of the distribution system operator. A follow-up compliance report has neither been published by the distribution system operator nor by the regulator, despite the respective legal obligations. Activities on aligning the statute of the distribution system operator with the Law on Public Enterprises and the Energy Law have been initiated, so far resulting in the change of statute of the parent company Public Enterprise EPS.
Access to the system
Access to the system
Provisions on third party access to transmission and distribution systems are transposed in compliance with the Third Energy Package. Tariffs for access to the transmission and distribution systems are determined based on the methodologies adopted by AERS and are published.
The Energy Law transposes requirements for the construction of direct lines in a compliant manner. Detailed criteria for issuing an authorisation for the construction of direct lines are further defined in the Rulebook on energy permits.
EMS is still not allocating cross-border transmission capacities on all its borders through a regional platform for coordinated capacity allocation. Allocation of capacities on the borders with Bulgaria and Croatia is performed through the Joint Auction Office (JAO), whereas capacities on the remaining borders are allocated through bilaterally agreed joint auctions with Bosnia and Herzegovina, Hungary, North Macedonia and Romania, or split auctions with Albania and Montenegro.
In October 2017, the Secretariat initiated a case under Article 92 of the Treaty against Serbia, requiring the Ministerial Council to establish a serious and persistent breach of its obligations under the Treaty (Case ECS 03/08S). The breach concerns a failure to take measures to rectify the breach of Energy Community Law established by the Ministerial Council Decision 2016/02/MC-EnC for not using the revenues resulting from the allocation of interconnection capacity on the interconnectors with Albania, Montenegro and North Macedonia for one or more of the purposes specified in Article 6(6) of Regulation (EU) 714/2009.
The wholesale market is fully deregulated and trading is taking place on the bilateral and on the organised day-head market, operated by the Serbian power exchange SEEPEX. Competition in both of the markets has improved over the last year. It is reflected in the concentration level which has decreased on the bilateral market from moderate to low, and in the day-head market from high to moderate. The trading volume on SEEPEX increased by 174% in 2018. Trading in SEEPEX is voluntary and the majority of participants are foreign companies which are allowed to trade in the Serbian wholesale market. In 2018, the transmission system operator also started to buy and sell electricity for covering network losses in the day-ahead market SEEPEX. A further increase of liquidity requires implementation of additional measures such as mandatory sales of electricity from renewable sources, further deregulation of retail prices and abandoning the licencing regime for wholesale trade. In 2019, the European Energy Exchange (EEX) introduced basic weekly, monthly, quarterly and annual futures products in the Serbian market settled against the day-ahead spot market price in SEEPEX.
The national balancing market is operational and imbalance settlement is applied to all market participants in a non-discriminatory manner. However, there is still no competition in the balancing market. Balancing services are provided by only one balancing service provider, the incumbent generation company EPS. Balancing reserves are provided by EPS based on the regulated price, which will continue to be regulated based on a report on the need for further regulation of these prices, published by the national regulatory authority in September 2018. The barriers to regional balancing market functioning and measures for their removal indicated in the report by the regulator have not triggered any activities. In addition, according to the market rules, EMS is obliged to give preference to balancing service providers that are obliged to offer balancing services, namely to EPS. The development of competition will require phasing out the preferential procurement of the balancing reserve and its price regulation.
New Rules on Publication of Key Market Data, transposing Regulation (EU) 543/2013 on market data transparency, are in force as of 1 September 2019. The new rules extend the obligation for data publication to the producers of electricity from wind and solar. However, full compliance, as regards the possibility to publish data on generation units, which are currently considered as commercially sensitive information, will require amendments of the Energy Law and other relevant laws. The REMIT Regulation is yet to be transposed by the deadline of 29 November 2019.
The retail market is highly concentrated due to the dominant position of the incumbent supplier EPS, both on the free market, with a share of more than 96% of electricity supplied, and as a guaranteed supplier, overall resulting in a share of more than 98% of total electricity supplied. The regulated price of guaranteed supply, to which households and small customers are entitled, is still below a competitive and economically justifiable price. This provides no sufficient incentive for customers to change their supplier, even though all customers are entitled to do so. The identified gap between regulated and market prices, together with the high share of the population falling within the status of absolute poverty and energy poverty, are used by the regulator as a justification for continuation of regulation of the price of guaranteed supply, according to the latest report published in September 2018. The report recommends to improve the protection scheme and decrease the gap between the market price and the regulated price of supply, but no measures were taken in this regard. The protection of customers shall be detailed by the decree on delivery and supply and rules on quality of delivery and supply, both of which have still not been aligned with the Law. The decree on vulnerable energy customers defines detailed criteria for obtaining the status of vulnerable customer and a procedure for obtaining the status of vulnerable customer was eased.
The distribution system operator has not yet prepared the implementation plan for the introduction of smart metering which the company was obliged to adopt within two years following the entry into force of the Energy Law.
EMS is still not allocating cross-border capacities in a regionally coordinated manner, except for the borders with Croatia and Bulgaria, which are allocated through the joint auction office JAO.
EMS is a shareholder of the Security Coordination Centre (SCC), which was established together with the transmission system operators of Bosnia and Herzegovina NOS BiH and of Montenegro CGES. However, regionally coordinated capacity calculation is still missing, and is subject to the adoption of a recommendation of the Energy Community Regulatory Board on early implementation of coordinated capacity calculation in the Energy Community.
EMS and the transmission system operator of Kosovo* KOSTT failed to make progress in implementing contracts signed in 2014.
Serbia is participating in a project for coupling with Montenegro, Albania and Italy, however, no tangible results has been made yet. In February 2019, a project for market coupling of Bulgaria, Croatia and Serbia was initiated.
EMS is exchanging balancing energy from a manually activated frequency restoration reserve on a bilateral basis with the transmission system operators of Montenegro and Bosnia and Herzegovina. Implementation of regional balancing cooperation, including imbalance netting with Montenegro in the first phase, is still pending.
Full transposition of the Connection Network Codes is pending adoption of an amendment to the Energy Law. However, the transmission system operator has partially transposed them through the newly proposed Grid Code, submitted to the regulator for approval.
Foreign companies established in the EU Member States or the Energy Community Contracting Parties are not required to have a seat in Serbia in order to obtain a license for wholesale trade.