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North Macedonia: Preparations for the Electricity Crisis

North Macedonia: Preparations for the Electricity Crisis

North Macedonia
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While trying to bounce back from the COVID-19 pandemic, the world is running headlong into an energy crisis, and North Macedonia will meet the same fate. The country is facing serious electricity shortages due to the rising growth of prices on the energy exchanges in Europe. This, in turn, disables the companies that trade in electricity to comply with the agreements signed with companies and institutions to whom they supply electricity on the free market. The disbalance in the demand and supply is then covered from the reserves of the transmission system operator (“TSO”) MEPSO, who is drawing electricity from the European network, thus accruing massive debt. Meanwhile, North Macedonia is trying to increase the domestic production of electricity, by activating the third block of REK Bitola, the country’s biggest producer of electricity and coal.

On 9 November 2021, the Government of the Republic of North Macedonia (“Government”) declared a 30-day state of crisis in the energy sector. This will enable for budget funding to be injected in the energy companies to increase their liquidity and intervene with the import of electricity, and further mitigate the consequences of the crisis as much as possible. So far, restrictive measures are not envisioned. Even though electricity prices for households are not expected to rise by the end of the year, the Energy Regulatory Commission is debating on either completely removing or significantly lowering the profit margins for energy companies during the adoption of the next decision on electricity pricing. The rationale behind such decision is to act in solidarity in a state of crisis.

Adopting Bylaws for the State of Crisis

Towards the end of October, the Government adopted a decree on the manner of declaring a state of crisis in cases of electricity shortages[1] (“Decree“), repealing the previous such decree, in order to align the legislation with the Energy Law adopted in 2018. The Decree more concisely defines the procedure, measures, and criteria for declaring a state of crisis. There is a new responsibility added for the licensees for performing energy activities, who will now have to bear the financial burden for implementing the measures provided in the Decree.

Certain criteria considered when determining whether a state of crisis should be declared include, among others, the production, transmission and distribution capacities of the system in North Macedonia, the status of the regional and international energy markets and their influence on the domestic market, as well as the available quantities from domestic production and the import of electricity.

To create conditions for rational use of electricity in times of crisis, the Decree provides for the following measures:

  1. any measures determined in the plans for acting in crisis situations, prepared by the electricity market operator, TSO and the distribution system operator;
  2. limitation of electricity consumption;
  3. providing additional quantities of electricity, including balancing energy and active power reserve.

The financial resources needed to implement these measures are provided from the licensees for performing energy activities themselves and the Budget of North Macedonia.

During the implementation of the abovementioned measures, the electricity market is suspended for the consumers connected to the electricity transmission network, suppliers and traders who supply electricity on the territory of North Macedonia, and they act according to the instructions of the TSO. Electricity distribution system operators, suppliers and traders of electricity are not responsible for the damages that will occur because of the implementation of those measures.

Five degrees of restrictive measures are envisioned, depending on the percentage of the lack of electricity. Based on these degrees, the following measures, in cooperation with local municipalities, can also be implemented:

  1. turning off all flashing billboard advertisements;
  2. reducing the lighting of streets, squares, and other buildings to a minimum safety level of lighting;
  3. limiting the lighting of the shop windows to a minimum safety level of lighting; and
  4. prohibiting the use of electricity for additional heating of business and office premises.

[1] Decree on the Criteria and Conditions for Declaring a State of Crisis in Cases of Natural Disasters, Accidents and Disruptions of Electricity Markets, Manner of Electricity Supply in Crisis and Condition and Obligations of the Holders of Licenses for Performing Electricity Activities (246/2021)

By Veton Qoku, Attorney at Law in cooperation with Karanovic & Partners

North Macedonian Knowledge Partner

ODI is a leading regional law firm in the CEE with offices in Slovenia, Serbia, Croatia and North Macedonia. The firm’s regional presence enables it to provide coordinated and seamless high-quality legal advice on projects across multiple jurisdictions or in a single location. The firm draws on the knowledge and experience of its locally and internationally trained lawyers advising on a broad range of matters, including banking & finance, competition, real estate, corporate / M&A, dispute resolution, employment and benefits, intellectual property, privacy and data protection, regulatory and administrative, restructuring and insolvency and tax.

The firm’s principal objective is to create value for clients by streamlining in-depth knowledge and experience in a particular industry. The firm has extensive experience in acting for clients on M&A transactions, with lawyers advising large multinational corporations, sponsors and lenders on all aspects of acquisitions. The firm’s lawyers are fully versed in conducting legal due diligence, transactional support, acquisition strategy and drafting and negotiating transaction documents in an M&A transaction. They take a commercial approach to how they handle transactions and deliver legal advice. The firm focuses on delivering services in a practical and timely way, while also focusing on what is required to move to the next stage of the transaction.

ODI’s North Macedonia office focuses on complex and high value domestic and multi-jurisdictional deals. Leading global companies and financial institutions particularly value the expertise of our Macedonian lawyers in competition, corporate / M&A, dispute resolution, employment and benefits and privacy and data protection matters.

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