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PRICE INCREASE JUSTIFIED WITH COST REDUCTION

BELGRADE, December 16, 2009 - On Tuesday, December 15, 2009, the Energy Agency of the Republic of Serbia sent its opinion on electricity price proposals, i.e. proposals for use of transmission and distribution network charges, to public enterprises Elektroprivreda Srbije (EPS) and Elektromreza Srbije (EMS).

The Agency accepted the proposed electricity price increase, on average, by 10% for tariff customers after an adjustment by EPS in the previous procedure, adding certain remarks and requests.

Data, based on which the prices are calculated, rest on forecasted prices and physical parameters for 2009. The Agency asked EPS and EMS to submit data for 2010 in whole as well as the projected price level for the following period.

The Agency points out that the practice of short term pricing should be abandoned because it threatens the investment realization and security of electricity supply in the following years. In order to provide a pricing policy based on long term goals, which should also include cost rationalization, the Agency requested public enterprises to submit their operation and development plans covering at least the period until 2015, to the Government of the Republic of Serbia for approval. The Agency, again, requested PE EPS to issue a distribution network loss reduction plan.

The Agency also hereby points out that it is necessary to prepare and implement the measures foreseen in the Government’s Roadmap, which sets forth a direct protection of the social customer group, expressing also its readiness to vigorously participate in this process despite of the fact that it is outside its domain of activity.

New prices in force bring an important novelty in market opening and liberation from monopoly. Namely, five EPS electricity distribution associations submitted for the first time their use of distribution network charge proposals. When these tariffs start to apply, the customers connected to the distribution network will have the opportunity, if they wish to use it, to switch suppliers and buy electricity from suppliers with most favorable offers. As of 2015 also households will have the possibility and right to switch. Until today, large customers connected to the transmission network had the right to choose their supplier, yet no one used this opportunity because of favorable prices of energy sold by EPS.

PE EPS and EMS will submit the price proposals with Energy Agency’s opinion to the Government of the Republic of Serbia for approval.


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