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13th Energy Investment and Regulation Conference
October 27-28 2014, Baku, Azerbaijan

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PRICE REGULATION

Frequently Asked Questions

  • What are the new items in electricity bills?
    The new Electricity Tariff System for Tariff Customers entered into force on March 1, 2008, and also a new Electricity Price List is adopted. Tariff Systems introduce new parameters into electricity bills, which are not extra expenses to be paid by customers, but the total electricity costs are simply allocated in a new (much fairer) way. In the bills for HV, MV and LV (industry) customer classes appear new items – EXCESSIVE DEMAND SET UP, EXCESSIVE REACTIVE ENERGY, and METER POINT CHARGE. The parameter fixed charge is erased from the bill of the category “consumer spending” (including households) and new parameters are introduced – CHARGABLE DEMAND and METER POINT CHARGE.
  • What is “excessive demand set up” and how much does it cost?
    Excessive demand set up is invoiced to customers on HV, MV and LV (industry) levels and equals to the positive difference between the metered maximum demand and authorized maximum demand when the customer applied for connection to the system. This difference is paid at double the price of the chargeable demand. The measured power may be reduced if a customer controls his consumption – rationalises the timing of appliance usage. If a customer is unable to reduce his demand, he may request that the authorized maximum demand be increased.
  • What is excessive reactive energy and how much does it cost?
    Excessive reactive energy is invoiced to customers on HV, MV and LV (industry) levels and equals to the difference between the reactive energy and the reactive energy corresponding to power factor cos(fi)=0,95. This energy is paid at double the price of reactive energy. It is possible to reduce reactive energy consumption by installing adequate compensation devices.
  • What is meter point charge and where does this payment go to?
    Meter point charge is an element of the Tariff System paid to the same amount each month for each point of metering, i.e. meter. This money covers the costs of the retail supplier of tariff customers (which, at the time being, works within the electricity distribution company), incurred in the course of trading with customers. These are the costs incurred in contracting (with other traders and customers), invoice preparation, printing and sending out etc. Therefore, the meter point charge is paid also for months when no consumption is registered.
  • Can it harm the customer if the meter reading period is longer or shorter than 30 days?
    The number of kW within consumption blocks (green, blue, and red) is determined for a 30-day consumption period – meaning that the typical number of days in a month is 30. Where more or less than 30 days has passed between two readings, the customer will not suffer any consequences because the number of kilowatt hours consumed in the respective blocks will be recalculated to the actual number of days. Where more than 30 days has passed between two readings, the number of kilowatt hours in the relevant block (e.g., green block with 350 kilowatt hours) is divided by the standard number of days in a month – 30, and, finally, the number of “green” kilowatt hours is multiplied by the number of days between two meter readings in that charging period (e.g., 36). In this way the threshold of the “green block” is shifted from 350 to 420 kilowatt hours. Where the reading period is shorter, e.g., 24 days, the “green block” threshold is 280 kilowatt hours. The same principle of shifting block consumption threshold applies to the “blue” block with 30 days available for 1250 kilowatt hours (consumption from 350 to 1600 kilowatt hours).
  • What is chargeable demand?
    Chargeable demand is a tariff rate applied to pricing electricity by demand tariff element. For the consumer spending category (including also the household group) this tariff rate applies to the authorized maximum demand which equals to the maximum coincidence demand of appliances in the apartment/house. For other customers, this tariff rate applies to the metered maximum active demand of connected facilities, up to the authorized level at the time of connecting. Demand in excess of that level is charged at excessive demand tariff rates. Authorized maximum demand for the consumer spending category is limited by switches. Demand is expressed in kilowatts. Electricity distribution companies shall make that demand available for customers whenever needed.
  • How and how much is the demand for households customers paid?
    The charge of one kilowatt of chargeable demand amounts to 23,75 dinars. Demand charge is paid each month and is calculated by multiplying the authorized maximum demand (the kilowatt amount) by the charge of 23,75 dinars. For example, if the approved demand is 11,04 kilowatt, the monthly costs would be 262,20 dinar, or 309,40 inclusive of tax.
  • Is it possible for household customers to pay different chargeable demands depending on the period of consumption (for example, several months of absence, owners of weekend houses etc)?
    The demand is defined by the maximum demand authorized in the connection approval. This demand is available for the customer at any time, thus it is paid to the same amount each month. Also, when there is no consumption at all (several months’ absence, weekend absence, etc.) the customer pays the cost of the specified demand. Only in case the customer temporarily cancels the meter (requests suspension of delivery) in accordance with the regulations on conditions for electricity delivery, he will not have to pay demand charges. This suspension may cover a minimum period of one year, or two years at the most.
  • Where can a household customer see how much demand has been authorized for his use?
    The authorized maximum demand is indicated on the bill, as in line with the records of the electricity company. Premises with a three phase connection with no authorized maximum demand are considered to have authorized maximum demand of 17,3 kW (corresponding to switches of 25 A).
  • Can a household customer request that the demand be changed?
    In accordance with the Decree on Conditions for Electricity Delivery, authorized maximum demand may be increased on the basis of a decision issued by the electricity distribution company. The customer may request the electricity distribution company to replace the standard main switches with automatic switches or to replace the existing automatic switches with automatic switches with nominal power – current greater or less than the existing one which must, however, remain within the approved demand range. The electricity distribution company will replace the existing switches with automatic ones corresponding to the demand requested by the customer and the demand will be charged according to the installed switch. Replacement costs are born by the customer.
  • Who files the request for decrease or increase in demand?
    Only the person whose name is on the connection approval, i.e. the owner or user of premises connected to the system, or, in case of tariff customers, the person who entered into the electricity purchase contract. For households - tariff customers this is the person whose name and surname are on the electricity bill.
  • How can a household customer determine the demand level it needs?
    The power is determined as the sum of individual powers of electrical appliances in a household which will be simultaneously turned on. When deciding the demand level, the customer must determine the power of all significant electrical appliances in the household, as well as the necessity of turning them on at the same time.
  • What is the power of all electrical appliances in a household?

    Electrical appliances

    Power (in kW)

    Refrigerator and freezer

    0,3 to 1

    Cooker (one hotplate)

    0,6 to 2

    Small water heater (kitchen)

    to 2

    Large water heater (bathroom)

    to 2, 5

    Tankless water heater

    6 to 18

    Dishwasher

    2

    Washing machine

    2

    Air conditioner

    0,8 to 2,7

    Thermal storage heater

    2,2 to 6

    Electrical heating boilers

    1 2 to 36

    Other (TV, radio, computer, light bulbs)

    In total 1-2

  • How long does a transition period last for charging households customers for demand that is lower than the authorized one?
    During the transition period, until the December 31, 2010 , customers have the possibility to file a request for installation of automatic switches matching the demand they need. If no request is filed until the end of the transition period, the demand will be invoiced in line with the authorized maximum demand. This right may be exercised also after expiry of the transition period and by other consumer spending category customers to who the indicated intermediate solution (charging demand that is lower than the approved one) does not apply.
  • When can the demand reduction or increase requests be submitted?
    The possibility to replace the switches with automatic switch of greater or lesser nominal power – current, but within the authorized demand range, is regulated by the Decree on Conditions of Electricity Delivery passed in December 2005. This possibility, however, existed also in previous regulations, indicating that there is no timing for submission of request specified by electricity distribution companies and that a request may be submitted right away. The new Tariff System for pricing electricity for tariff customers and the method of pricing demand according to that act shall apply as of March 1, 2008 in line with the Decision of the Decree, with a separate rule for the transition period, as explained in answers 9 and 10.
  • What role do automatic switches have within the application of new regulations?
    The role of automatic switches is to prevent exceeding the limit of the authorized maximum demand and to protect the network from damages on electrical appliances and home installations.
  • Who checks whether the customer who pays a specified chargeable demand has appropriate switches installed?
    The electricity distribution company checks whether customer’s switches match the authorized maximum demand.
  • Who determines the charges of connecting to the power transmission/distribution system?
    Charges of connecting to the transmission/distribution system are determined by the electricity transmission/distribution entity in accordance with the connection charging methodology passed by the Energy Agency of the Republic of Serbia.
  • What does the charge of connecting to the electricity transmission/distribution system include?
    Charge of connecting to the power transmission/distribution system includes costs of equipment, devices and materials, costs of works execution, design preparation, gathering necessary documentation and part of costs of network development incurred by connecting the facility, and depends on the authorized maximum demand.
  • Where can I find out how much the charge of connecting to the transmission/distribution system is?
    For households, which have standard connections, refer to the webpage of or directly at relevant electricity distribution companies to learn of distribution system connection charges. For other connection categories, connection charges are set by transmission or distribution companies after receipt of customer’s request. Acts determining connection charges, i.e. charge levels and the charging method shall be made available to applicants by the relevant energy entity.
  • Where can I file an appeal against the Approval for Connection to the electricity transmission/distribution system?
    An appeal against the Approval for Connection to the electricity transmission/distribution system may be filed to the Energy Agency of the Republic of Serbia within 15 days after the date of receipt of the Approval. The Decision of the Agency on the appeal filed is final and an administrative procedure may be instituted against it.
  • Which types of connections are there?
    According to the complexity and dependent on technical conditions of connecting premises to the transmission/distribution network, the type of premises and distance the premises are from the system, connections are classified into standard and custom. For a standard connection, the design is standardized according to technical conditions and the construction costs are averaged, while for the custom connection, a unique technical solution is designed and the actual construction costs are calculated. Dependent on the number of metering devices, the standard connection is categorized into individual and group standard connections. The requested connection power, number of phases, and type of network (ground and underground) to which the customer shall be connected define the standard connection subtype, individual or group. The standard connection of group type is also defined by the number of metering devices and the consumption purpose (with or without heating).
  • Which specific revenue in practice can occur in the Form of proposed prices GE-20-6 OTHER REVENUES in natural gas distribution?
    In accordance with the Methodology for Determining Tariff Elements for Pricing Access to and Use of Natural Gas Distribution System (“Official Gazette of the Republic of Serbia”, No. 68/2009 and 1/2007) “Other Revenues” are revenues that derive from regulated assets of the natural gas distribution activity (apart from revenues earned from use of natural gas distribution system which are invoiced by regulated tariffs), and the natural gas distributers in practice commonly have the following revenues indicated thereunder: revenue from own work capitalized (those are commonly revenues earned from activating the natural gas distribution system constructed on the part of the company itself), revenues from selling assets previously a part of regulated assets, revenues from issuing prescribed technical conditions, revenues from restoring natural gas delivery for natural gas distribution system users to whom the delivery was previously suspended in line with the Decree on Conditions for Natural Gas Delivery (“Official Gazette of the Republic of Serbia” No. 47/2006), revenues from metering devices calibration for third persons (on condition that calibration equipment is part of regulated assets) etc.

    “Other Revenues” within the meaning of the methodology exclude revenues from donations, as well as revenues associated with connecting users to the natural gas distribution system.

  • Which provisions of the Energy Law regulate the responsibilities of energy entities carrying out natural gas distribution, natural gas distribution system operation, and natural gas retail for tariff customers?

    In the followings are several indicative articles from the Energy Law (“Official Gazette of the Republic of Serbia” No. 84/2004) defining the responsibilities of energy entities conducting relevant energy activities:

    Distribution system operation

     

    Article 130, para. 3: “An energy entity carrying out natural gas distribution activity shall be responsible for regular and safe distribution of natural gas, functioning, maintenance and development of the natural gas distribution system, and apply technical regulations and standards for its line of activity, as well as respect environmental protection conditions stipulated by laws and other regulations.” Note: Thus, the energy activity of natural gas distribution primarily includes maintenance and development (construction) of the natural gas distribution system (including also connection to the natural gas distribution system).

    Article 130, para. 4: “Energy entity carrying out natural gas delivery shall also carry out technical control of indoor gas installations in the consumer’s facility, in line with technical regulations and the grid code on construction, maintenance and use of indoor gas installations.” Note: Thus, the energy activity of natural gas distribution includes also technical inspection of indoor gas installations.

    Article 130, para. 5: “The consumer shall ensure maintenance of indoor gas installations in his facility by entrusting that task to an enterprise, i.e. another legal person or entrepreneur that has at least three adequately skilled employees who have passed professional examination from Article 47 of this Law.” Note: Thus, natural gas distribution does not include maintenance of indoor gas installations which come under non-energy activities.

    Article 131, para. 1: An energy entity carrying out natural gas distribution shall draft and adopt five-year development plans for the construction of new and rehabilitation of the existing natural gas distribution systems.”

    Article 131, para. 2: An energy entity carrying out natural gas distribution activities shall be responsible for the implementation of the development plan referred to in para. 1 hereof.”

    Article 51, para. 1: A facility shall be connected to the transmission, i.e. transportation or distribution system on the basis of an approval of the energy entity to whose system it is being connected, and the agreement of the system operator.”

    Article 51, para. 2: The energy entity to whose system the consumer’s facility or the energy producer’s facility is to be connected, shall approve the connection referred to in para. 1 hereof, provided that the facility devices and installations to be connected meet the requirements stipulated by law, technical and other regulations on exploitation terms and conditions of such facilities.”

    Article 52, para. 1: “At the request of a legal or physical person whose facility is to be connected, the approval shall be granted by a decision.”

    Article 52, para. 2: “The energy transmission, i.e. transportation or distribution entity shall decide a request for connection within 30 days as of the date of receipt of a written request.”

    Article 54, para. 2: ”Measuring devices, i.e. measuring and control stations for connecting consumers’, i.e. energy producers’ facilities to the system, shall be provided by the transmission, transportation, i.e. distribution energy entity which shall install, maintain, and calibrate them as its own assets and measure the delivered energy.” Note: Thus, upon coming of the Energy Law into effect, any new metering devices (i.e. connections) shall be constructed by natural gas distribution entities as their own assets.

    Article 176, para. 1: “Energy entities for energy transmission, transportation, i.e. distribution and existing consumers shall, within two years as of the date of entry of this Law into force, conclude contracts regulating the conditions and manner of taking over measuring devices and consumers’ measuring-regulating stations, as well as methods of regulating property-legal relations implied by that take over.

     

    Distribution system operation

    Article 36, para. 3: “The access to and use of system charges from para.2 hereof (prices of access to and use of the transmission/transport or distribution system, i.e. storage for natural gas), shall be determined by the system operator in conformity with the pricing methodology for system access and use, based on the previously obtained opinion of the Agency.”

    Article 37, para. 1: “A system operator may refuse access to the system when technical possibilities do not so allow due to a lack of capacities, faulty operation or system overload, i.e. as a result of threatened system functioning safety or the objection of an energy producer in the Republic of Serbia on a lack of reciprocity.”

    Article 37, para. 3: “A system operator shall bring a reasoned decision on refusing system access within three days as of the date of application for system access, at the latest.”

    Article 51, para. 1: A facility shall be connected to the transmission, i.e. transportation or distribution system on the basis of an approval of the energy entity to whose system it is being connected, and the agreement of the system operator.”

    Article 134, para. 1: “Natural gas distribution system operators shall adopt distribution system grid codes, with the approval of the Agency.”

     

    Natural gas retail for tariff customers

    Article 56, para 1: “Before the consumer’s facility is connected to the transmission, i.e. transportation or distribution system, the energy supplying entity and the energy consumer shall conclude a sales contract for power, natural gas or heat.”

    The gas retailer shall also, for the purpose of supplying tariff customers, conclude a natural gas purchase contract with the natural gas wholesaler, invoice and charge the natural gas sold to tariff customers and conduct other trading activities in connection with the supply of tariff customers.

  • Who is obliged to keep separate accounts and what is it for?

    The obligation to keep separate account of energy entities conducting two and more energy activities, or conducting in addition to the energy activity also other activities which are considered non-energy activities within the meaning of the Energy Law (“Official Gazette of the Republic of Serbia”, No. 84/2004), is specified in Article 43 of the Energy Law (Article 43, para. 2 and 3: “An energy entity carrying out two or more energy activities shall keep separate accounts for each energy activity in its internal accounting, as well as consolidated accounts for other activities, and draw up balance sheets showing revenues, expenditures and operating results for each activity individually pursuant to this Law and laws regulating commercial entities business operations, accounting and auditing.

    The energy entity from para. 2 hereof shall ensure independent auditing of balance sheets for all activities and submit balance sheets and auditing reports to the competent authority and shall publish them within the period and under the terms stipulated by the law regulating accounting and auditing.”) The Article 160 of the Energy Law specifies that an energy entity, or other legal person shall be fined with 50.000 – 3.000.000 dinars for a commercial offence if it fails to keep separate accounts for each energy activity of general interest, fails to prepare business balance sheet, or fails to arrange auditing of the mentioned balance sheet in compliance with Article 43, paras. 2 and 3 of this Law. The same Article specifies that the responsible person, or other legal person of the energy entity shall be fined between 20.000 and 200.000 dinars for the commercial offence.

    Apart from the above mentioned, the approval of the Energy Agency of the Republic of Serbia granting licenses for conducting energy activities also defines obligations of energy entities to observe, amongst other, conditions with regard to separation of accounts while conducting licensed or other activities. A license may be temporarily or permanently revoked to a license holder in case he fails, in conducting the licensed activity, to observe conditions specified by the law regulating the conduct of energy activities, and conditions under which the license has been issued. Further to this, contracts on entrusting conduct of activities of general interest entered into between energy entities and the Government of the Republic of Serbia also specify the above mentioned obligation concerning separation of accounts, and provide that the contract is considered broken, amongst other, also because of failure to meet this obligation.

    The purpose of separating accounts can be recognized in Article 67, para 2 of the Energy Law: “The tariff elements for calculating energy delivered and services rendered shall contain the justified operating costs comprising the costs of depreciation, maintenance, construction, rehabilitation and modernisation of facilities, insurance, fuel, environmental protection and other operating costs that ensure an adequate term and rate of return of investments in energy facilities.” All natural gas-related methodologies and tariff systems passed by the Agency are also based on the coverage of justified operating costs and an appropriate return on assets employed. Thus, for natural gas pricing for tariff customers and use of gas pipeline system charging (storage, transport, distribution) it is necessary to identify the operating costs for individual activities, which can be done only from separated accounts by individual energy activities.

    Separation of accounts is a prerequisite for implementation of tariff systems and the calculation of prices by tariff systems, in other words, energy entities which failed to separate accounts in line with Article 43 of the Energy Law would not be able to obtain positive opinion of the Agency on the proposed price act.

    Balance sheets and income statements by energy and other non-energy activities are externally submitted exclusively to the Agency and to no other authority (National Bank of Serbia), with their sole purpose to enable calculation of prices according to tariff systems and monitoring of energy entities’ behaviour by activities they carry out. Balance sheets and income statements shall be submitted to the Agency on the same forms used for official financial statements submitted to the National Bank of Serbia, i.e. on forms specified in the “Rulebook on the contents and format of forms of financial statements of industry associations, cooperatives, and other legal persons and entrepreneurs” (“Official Gazette of the Republic of Serbia” No. 114/2006 and 5/2007).




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