Energy on the free market: Effect on Public Services Prices

While the greatest noise for liberalising the electricity market in Kosovo has been heard by the private sector, public companies have entered this process without much fuss, but not without consequences.

At market prices that will no longer be regulated by the state and at new energy costs expected, the main question is, Will the prices of public services that citizens receive daily increase?

Economy experts warn that this transition could bring increased tariffs for essential services, such as water and cleaning, which directly depend on energy consumption.

Any attempt of these price movement companies should be banned from their owners. And their owners are known who are local-level municipalities, and at the central level is the government”, Free Europe Berim Ramosaj, professor of economics at the University of Pristina, tells Radio Berim Ramosaj.

KEK supplies

Kosovo Energy Regulatory Office ZRR confirmed for REL that, from June 1st, all central and local public companies, which have over 10m euros in circulation and over 50 workers, have emerged on the open energy market.

These companies are being supplied by the Kosovo Energy Corporation, which is licensed by the ERE for commercial electricity supply.

Parasely, they are supplied by the power supply operator KESCO, with tariffs regulated by the ERE.

The supply, from now on, will take place at market prices and not defined by state institutions.

Neither KEK nor ZERE have provided detailed information on the number of public companies that have signed contracts for energy supplies to the open market.

In a media communiqué on June 5th, KEK has indicated that it has signed 15 commercial contracts with consumers who have chosen direct supplies but has not specified whether it comes to public or private companies.

In addition to KEK, another 20 companies for electricity supply are licensed in Kosovo, while another is in the process of licensing.

Financial Challenges

Currently, 18 central and regional public companies operate in different sectors, such as energy, transport, telecommunication, postal services, waste management, water supply and others.

In addition, according to the Institute for Advanced Investigations, GAP, there are 55 local public companies.

Blendi Haysey, from this institute, estimates to Radio Free Europe that well-off public companies can maintain current utility prices, but those that over the years have faced financial difficulties will have challenges due to increased electricity costs.

This reality leads to a key point: these companies should either increase service prices or the government should intervene. One of the possibilities is for the government to subsidize these companies, because I don't believe it would be appropriate for all public services to be immediately expensive”, says Hasey.

Asked by Radio Free Europe for such a possibility of subsidies, the Government of Kosovo did not respond.

REL has contacted several of the public companies including Kosovo Telekom, Post, Trepca, Regional Water Company “Pristina”, Regional Company “Cleaning”, Depony Management Company and Urban Traffic Company to ask whether going out into the open market will affect the rising prices of services they offer.

Of all this, only Kosovo Telecom/ THE VALA has returned, stating that any increase in costs, including those of energy, directly affect the price of services the company offers.

“... but, we will try as much as possible to make this additional cost reflect less on the price of services for consumers”, said Fadil Lepaja, head of the Office for Communication at this company.

According to him, Telekom pays around 1.5m euros annually for electricity bills.

What do businesses say about energy liberalisation?

Along with public companies, about 1,300 private businesses have entered the free energy market.

But opening this market has prompted strong reactions and numerous concerns about the country's prices and readiness for this change.

Business representatives insist that the liberalisation delay for at least a year, arguing that the prices the licensed companies offer for supply are much higher than the state-defined ones, while some have not yet submitted offers to the market.

In this situation Oda American Economics in Kosovo has asked Z THREE's urgent suspension of the process until the implementation of fundamental conditions.

The “just days after the liberalisation entered into force, at least two production companies have suspended operations, citing high electricity costs as reasons. State institutions have been informed of these developments”, said in its media communiqué released on 5 June.

Energy market liberalisation is a European Union requirement and is envisioned in the Energy Community Treaty that Kosovo has signed since 2005, along with other countries in the region.

Albania and Northern Macedonia also have liberalised energy markets.

Even in these two countries, there was initially resistance, but today the process is seen as an opportunity for better management of energy costs.

In Kosovo, however, this transition takes place at a challenging economic moment according to a recent Eurobarometer poll, 45 per cent of citizens say facing survival expenses is their main concern. / REL/ Periscopi/