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Liberalization of the Energy Market in Macedonia

Liberalization of the Energy Market in Macedonia

North Macedonia
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Macedonia has started the process of liberalizing and privatizing the energy market as an obligation deriving from the Treaty establishing the Energy Community signed on October 25, 2005 in Athens (the “Treaty”).

In 2010, the Government adopted the Energy Development Strategy to 2030 which identified the integration of the Macedonian energy market into the regional and European energy and natural gas markets by constructing new interconnections and implementing the EU energy market regulations in national legislation as a key priority. The Government also anticipated the implementation of the latest set of EU energy market regulations – known as the “Third Energy Package” – in national legislation. However, Macedonia has not yet ensured the proper transposition of the requirements of the Third Energy Package in the areas of market opening and price regulation, unbundling, third-party access, balancing, eligibility, customer protection, efficient regulatory powers, or independence.

In 2011, the Macedonian lawmaker adopted the Energy Act in the form of an umbrella law covering electricity, renewable energy, oil and gas, and regulation of the energy transmission and distribution markets. The Energy Act envisaged the full liberalization of the energy market by January 1, 2015 in two phases. Initially, the Energy Act envisaged the entrance to the market by eligible customers (i.e. companies with more than 50 employees and annual turnover exceeding EUR 10 million) for July 1, 2013. However, due to continued non–compliance with the Market Rules by operators, in June 2013 the Energy Regulatory Commission (ERC) decided to postpone the market opening to avoid the destabilization of Macedonia’s electricity supply. Subsequently, the entrance to the market of all customers (except for households) was rescheduled for April 1, 2014. This deadline was also not met, however, since, according to the ERC, only large consumers who had already participated in the competitive market signed supply agreements with licensed electricity providers; all the other companies claiming eligibility to enter the market had not yet entered into electricity supply agreements. In relation to the entrance of households on the market, the Energy Act allowed the distribution system operator, EVN, to maintain its monopoly for the supply of electricity to households until December 31, 2014 on the basis of electricity prices strictly regulated by the ERC, and, as of January 1, 2015, to allow households to pay market value prices for their electricity.

In October 2014, the Macedonian lawmaker amended the Energy Act by abolishing the eligibility status of small companies and households initially granted as of April 1, 2014 and January 1, 2015 respectively. Under these amendments, small customers and households would be progressively granted the right to switch suppliers according to the following schedule (i) small customers with an annual consumption above 1 GWh in 2015 would be eligible as of July 1, 2016; (ii) small customers with an annual consumption above 500 MWh in 2016 would be eligible as of July 1, 2017; (iii) small customers with an annual consumption above 100 MWh in 2017 would be eligible as of July 1, 2018; (iv) small customers with an annual consumption above 25 MWh in 2018 would be eligible as of July, 1 2019; and (v) households would be eligible as of July 1, 2020. As these restrictions for small customers and households to freely choose their supplier is a breach of the Treaty, in January 2015, the Energy Community Secretariat opened an infringement procedure against the Government for its failure to comply with the Energy Community’s eligibility rules.

The Government has also failed to transpose the unbundling requirements of the Third Energy Package, as currently the Energy Act transposes only the unbundling requirements from the Second Energy Package. The transmission network operator MEPSO is only legally unbundled while the legal and functional unbundling of the distribution network operator EVN was completed in 2016 by the establishment of its EVN Distribucija subsidiary. The new company has not yet taken measures to ensure the functional unbundling such as rebranding and new visual identity, as the Energy Act does not transpose those requirements from the Third Package. The generation operator ELEM is currently exempt from legal unbundling. However, it has not yet implemented accounting unbundling, in breach of Directive 2009/72/EC.

In August 2017, the Government proposed a new draft Energy Act, but it remains to be seen whether it will be in compliance with the Third Energy Package.  

By Gjorgji Georgievski, Partner, and Marija Serafimovska, Junior Associate, ODI Law 

This Article was originally published in Issue 5.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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