АЕRS – UP TO 13.5% HOUSEHOLDS ELECTRICITY PRICE RISES

BELGRADE, January 24, 2011 – Electric Power Industry of Serbia (Elektroprivreda Srbije) and Serbian Transmission System and Market Operator (Elektromreže Srbije) submitted their proposals for the modification of electricity price and the price for the use of transmission and distribution grids to the Energy Agency. The Agency has completed the analysis and issued an opinion implying the prices for households and other mass consumption areas may be increased per maximum 13.5%, while for other consumption categories, the increase may be a bit higher. This price also includes certain profit making. Since these are state-owned companies, Agency opinions indicate that the Government may adopt a separate decision on the profit level in line with their development plans, general pricing policy and macroeconomic policy. It implies that electricity price increase may be lower pro rata.

PE EPS and PE EMS have reduced, i.e. amended their costs in comparison to their original request, which the Agency considered unacceptable. The data used for calculation of proposed prices were based on planned physical quantities and prices for 2010 and these do not include costs modifications and other elements’ modifications which will be faced in 2011. Eligible costs in the distribution grid calculated for these prices are around 10% lower than the ones borne in 2009 with the collection rate of 98%. Approved costs do not include sponsorships as well as other expenses which are not directly related to core activities and which can be financed from profit funds if agreed by energy companies’ founders.

The Agency asked the companies to submit their long-term operations and development plans which would include further rationalization of total costs, as well as the plan for the reduction of losses in the distribution network. Thereby, there would be no more price establishment based on short-term grounds, which would jeopardize investments and security of electricity supply in the years to come. These plans also represent a condition for future successful placement of Electric Power Industry of Serbia on the regional market.

The Agency would like to highlight once again the necessity to establish an efficient mechanism for direct protection of socially vulnerable tariff customers as soon as possible. The mechanism should be applied to those who are in fact not in a position to pay for actual electricity costs. Thereby, one would provide for energy prices to reach the level securing long-term sustainable development of the energy sector, bearing in mind increased costs for environment protection and planet protection from global warming in particular, as well as the investments in new capacities. The Government will decide on the date and the final rate for price increase.

In any case, average tax free electricity price for all consumers is currently on the level of 5 RSD or 4,8 €c/kWh, for households 4,9 RSD, i.e. 4,65 €c/kWh. It is lower than in any of the neighbouring countries or in Europe as a whole. One should bear in mind that the Agency takes these comparisons into consideration as a clue, not as an element for confirmation of validity of either costs or energy prices for tariff customers or the prices for the use of energy network.