The Liberalisation of the Serbian Electricity and Gas Markets
Taking the goals of energy market liberalisation as a starting point, namely security of supply, promotion of energy efficiency, use of renewable energy sources and increasing consumers` well-being by reducing electricity and gas prices, this article aims to research the process of liberalising the energy market and reach an answer on the question of what will benefit Serbia’s electricity and gas sectors most, whether that be remaining in the arms of government or becoming fully liberalised, allowing state-owned energy incumbents to be privatised and private companies to become owners of the production, transmission, distribution and supply operations. On one hand, there are requirements from the European Union for opening the energy sector to competition and market principles, which need to be respected by Serbia, as a candidate country; on the other hand, energy incumbents owned by the state still provide electricity, gas and heat energy. This article will identify the positive and negative effects of a liberalisation policy in undeveloped countries and will outline the regulatory tools that increase competitiveness in the market.
The article comprises four chapters. The first chapter provides a general overview of the process of liberalising the energy markets, emphasising some crucial aspects of this process. The second chapter addresses how the European Union may influence the opening of energy markets, by continually developing European energy policy and through the rules of competition law. The third chapter explains how Serbia implements the European energy policy, highlighting its achievements in the production, supply and transmission operations in the electricity and gas markets, as well the level of applying competition law tools in the energy sector. It will also introduce the Energy Community, a regional organisation that facilitates the implementation of EU energy legislation in South-East Europe and the Black Sea countries. Finally, the fourth chapter provides a conclusion on the effects of liberalisation in undeveloped energy markets, such as Serbia, and on the legal mechanisms that need to be revisited in the Energy Community legal framework to bring about the desired effects of liberalising the energy market.
Traditionally, electricity has been treated as a commodity that must be available to all consumers in adequate quantities, regardless of the price. A state was responsible for ensuring that consumers are supplied with electricity at a price lower than the cost of production.
Liberalising the electricity and gas sectors deregulates them and removes their monopoly status. Publicly owned incumbents enjoyed sole ownerships of all the production and supply facilities, as well as all transmission and distribution networks. Private investors were unable to enter the market and consumers were unable to choose their own suppliers. It can also be said that liberalisation policies intend to withdraw state influence over the energy incumbents.
From the start of the 1980s to the present, worldwide energy sectors have been subject to significant reforms, characterised by the following factors:
1) Restructuring monopoly companies that had operated all energy functions, into competitive companies, by separating the energy functions from each other
2) Opening markets for production and supply and ensuring fair and equal third party access
3) Privatising state property.
To privatise state-owned companies, transition countries must fulfil certain preconditions, such as to proceed with turning energy incumbents into corporations, to reform the legal systems, to restructure energy companies, to establish regulatory bodies that would monitor energy markets, and to develop wholesale markets. However, the privatisation of state-owned undertakings is a last resort action and not the usual means of reforming energy markets.