Croatia: Preparing the Energy Market for EU Accession

Introduction

One of Croatia's obligations as part of its accession to the European Union on July 1 2013 is the incorporation of the EU Third Energy Package. To this end, on November 19 2012 Parliament passed the Energy Act (Official Gazette 120/12). In accordance with the transposition provisions of EU Directives 2009/72/EC and 2009/73/EC, the Energy Act incorporates the respective directives of EU law (Article 2).

The Energy Act regulates:

• measures of security of supply and sustainability;
• generation and consumption;
• policy and planning;
• energy market and public services energy activities; and
• general principles of energy activity.

Separate acts regulate the gas, electricity, oil, heat and renewables markets.

'Energy' is defined as "primary energy and/or transformed energy, that is, electrical energy, heat energy, gas, oil and oil derivatives and energy from renewable sources" (Article 3).

Energy policy and planning

The national energy policy and planning measure is the Strategy of Energy Development(1) (for further details please see "National electricity company calls for investors in €800 million Plomin C project"), while the action plan is the Strategy of Energy Development Implementation Programme (which has not yet been passed).

Government entities, energy undertakings and significant final customers must file annual energy reports to the competent ministry. On the basis of these reports, the government will pass long-term and annual energy balances, needs, sources and measures.

The Energy Act introduces guarantees of energy origin, although the relevant implementing regulations are still to be passed.

Energy activities

Energy activities are:

• generation;
• transport;
• storage;
• distribution;
• management of energy facilities;
• supply;
• trade; and
• energy market organisation.

The Croatian National Regulatory Agency (HERA), as the independent energy regulator, grants permits for energy activities of undertakings (the implementation acts specifies which activities do not require permits).

Energy market and public service

Energy activities are either market activities or public activities. These are regulated by separate acts (eg, the Electricity Market Act, Official Gazettes 177/04, 76/07, 152/08, 14/11 and 59/12).

Undertakings generating electrical energy, heat or import or export oil must maintain operational reserves.

The Ministry of Economy ensures security of supply and sustainability on the basis of reports that energy players must file by the end of March for the preceding year.

Energy prices

According to the new Energy Act, energy prices for end consumers have three components:

• the freely contracted component;
• the regulated component (regulated by the tariff system); and
• the other costs and fees component (ie, contribution for energy market organisation (Article 29(12)).

The tariff system comprises the prescribed methodology plus the amounts of tariff items. HERA prescribes the methodology and sets the amounts for tariff items on the basis of proposals by the undertakings, except for the tariff system for the generation of renewable and cogeneration electrical and/or heat energy, which is set by the government. The tariffs should encourage energy efficiency, consumption management and increased consumption of cogeneration and renewable energy.

Network connection terms and conditions and energy supply

The government prescribes particular terms and conditions for connection to the energy network and the contractual relationship between customers and undertakings regarding the terms and conditions of connection.

HERA prescribes the methodology for contribution to the network connection, the general terms and conditions for the supply of energy, and the terms and conditions for the quality of supply.

The network operator has the power to define the technical requirements for smart grids and intelligent metering systems, while the ministry sets down the measures for implementing smart grids and intelligent metering systems (including the Strategy and Implementation Programme).

End consumers under special protection

The protection of end consumers is ensured through the introduction of two categories of protected consumer:

• Protected consumers are buyers with the right to receive a set amount of energy in case of disturbance of supply; and
• Endangered consumers are households with special social status, an ascertained degree of disability or a member with poor health.

Comment

The new Energy Act paves the way for implementation of the EU Third Energy Package. According to Article 54 of the Energy Act, within six months the government, the Ministry of Economy and HERA must pass a number of implementing rules and regulations that will set down the procedures and measures for the implementation of security of supply and sustainability, a full open market, non-discriminatory access to networks, smart grids and intelligent metering.

Endnotes