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16th ERRA Summer School
Introduction to Energy Regulation
July 09-14, 2018, Budapest, Hungary

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PRICE REGULATION

Electricity

Electricity prices, as well as the prices of services provided by energy entities while performing energy activities are not regulated, unless it is prescribed otherwise by the the Energy Law.

Electricity transmission and distribution use-of-system charges are regulated for all system users, as well as the prices of auxiliary services: primary control, voltage regulation, black start and island mode. Apart from the above mentioned prices, prices of electricity meant for guaranteed supply and prices of capacity reservation for system services of secondary and tertiary regulation can also be regulated.

Guaranteed supply represents a public service which secures the right of households and small customers to have electricity supply on the territory of the Republic of Serbia at reasonable, easy to be compared, transparent and non-discriminatory prices. All final electricity customers are entitled to select their supplier in the market, while only households and small customers are entitled to guaranteed supply (households and small cusomers can both exercise that right and select an electricity supplier in the market).

Graphic review of regulated and non-regulated prices for final electricity customers are available here.

Price regulation in the electricity field is organised in line with the following principles:

  • Coverage of justified costs
    Price regulation should provide a regulated company with a possibility to accrue revenue from regulated activity which will cover justified costs of its operation (operational costs and assets costs). Justified costs include the costs which are necessary and inevitable (including a certain yield from money and investments placed efficiently) so as regulated activity could be performed in a secure manner and in a quality manner. The coverage of justified costs is crucial for the provision of short-term security of supply (via adequate maintenance and overhauls of existing infrastructure), as well as for the provision of long-term security of supply (via timely investments in development and capacity building, in order to provide infrastructure corresponding to the consumption growth forecast). This enables sustainable power sector development.
  • Economic and energy efficiency
    Economic and energy efficiency are enabled by:

    - control of costs justifiability in energy entities and of their development plans (technical efficiency) and
    - optimum tariff structure (allocation efficiency).

    Techical efficiency implies that the energy activity is performed with minimum costs which provided for maximum reliability of system operations, both in short and long term.
    Allocation efficiency implies that the prices give economic signals to customers (for optimum use of electricity, transmission and distribution services) as well as to the owners of existing infrastructure and the one to be built in the future (for the maintenance of existing infrastructure and the cosntruction of new one). Allocation efficience is aimed to maximise social welfare, i.e., the optimum ration between the welfare of customers and the profit of an energy entity.
  • Non-discrimination
    The non-discrimination principle implies that regulated prices provide for an equal treatment of the same customers’ category and group and system users in terms of the procedure for the establishment of regulated prices, regardless of the size, ownership and other characteristics of customers and system users as well as the prevention of mutual subsidising between some customers, customers’ categories and groups or system users and between some activities performed by energy entities.
  • Regulation efficiency
    The principle of efficient regulation implies minimisation of Agency’s costs arising from the implementation of price regulation, as well as of costs with regulated energy entities arising from compliance with the commitments prescribed by regulatory mechanisms and procedures.
  • Transparency
    Transparency principle in price regulation implies that the Agency will make methodologies for setting regulated prices and decisions on approvals of documents on regulated prices adopted by energy entities public (Official Gazette of the Republic of Serbia, Agency website) as well as other pieces of information on regulated prices. In addition, the Agency encourages transparency in price regulation via public consultations on the drafts of methodologies setting regulated prices.


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    RELATED LINKS
    How prices are established
    Methodologies for setting prices
    Approval of prices and rationale
    Prices
    System services
    Connection costs
    Statistics


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