Zuljevic and Konakovic's populism from 2021 comes due: EP BiH must increase electricity prices to survive!

(Patria) - The FBiH Government declared a state of endangered electricity supply security in order to increase electricity prices by about 60 percent.

Namely, according to the Law on Electricity, Article 16a, the increase in electricity prices can amount to a maximum of 20 percent. Given that this year's electricity price for economic entities in the Federation is 72 euros, the maximum price during 2024 could be 85 euros. The average market price of electricity this year is around 140 euros. If Elektroprivreda BiH does not increase the price by more than the prescribed 20 percent, the operations of this company will certainly be endangered.

Istraga.ba writes about the reasons here.

The collapse of the electricity sector officially began in December 2021, when then-opposition delegates Aner Žuljević and Elmedin Konaković submitted amendments to the Law on Electricity.

“If there is a disruption in the electricity market in such a way that the price of electricity supply for a qualified customer increases by more than 20% compared to the previous year, the Government of the Federation is obliged to limit the increase in electricity supply prices to a maximum of 20% by a special decision, which also applies to contracts with an annual duration or longer,” stated the amendment proposed by Konaković and Žuljević.

Thus, thanks to Konaković and Žuljević, the price of electricity in Bosnia and Herzegovina during 2022 was 72 euros for economic entities. And nothing would be wrong with that if the largest electricity consumers, ArcelorMittal Zenica and the cement plants in Lukavac and Kakanj, did not receive electricity twice as cheap as the market price, while selling their products on the market at significantly higher prices. That is why ArcelorMittal reported a profit of around 240 million marks in its 2021 and 2022 reports. At the same time, this reduced the revenues of Elektroprivreda BiH, which managed to cover its costs by selling surplus electricity. Namely, the balancing price, the one sold on a daily basis, reached up to 1000 euros per megawatt.

However, when the price of electricity on the market fell this year, revenues from the sale of surpluses began to decrease significantly. Here's what Istraga.ba published on December 30, 2021.

“The price of electricity for economic entities could be increased by only 20 percent. In the specific case this year, this would mean that the price of one megawatt for economic entities would increase from 50 euros to only 60 euros. Therefore, Elektroprivreda BiH, if it increases the price of coal by 20 percent, would produce one megawatt for 51 euros.

A larger part of the produced electricity would be sold to the population for 32 euros, while electricity would be sold to economic entities for 50 euros, which is only four cents more than the production price or 140 euros less than the price of electricity on the world market. If these prices remain, the projected annual loss of Elektroprivreda BiH would be 85 million marks, which would be a sure path to the collapse of the electricity system of Bosnia and Herzegovina,” we published two years ago, analyzing Konaković's and Žuljević's proposal in detail.

However, this is not the only cause. For example, miners' protests and constant concessions under social pressure have put Elektroprivreda in a difficult situation. Namely, mines in the Federation of BiH, as part of the concern, reduced production by about 50 percent last month. This forced the new management of Elektroprivreda BIH to continue the practice of the previous management and start buying coal from private mines. Thus, in mid-November, the new Management of EP BiH decided to initiate the procurement of 400 thousand tons of coal from Lager, with an estimated value of 70 million KM.

Let us remind you that the former management of Elektroprivreda BiH procured 600 thousand tons of coal from Lager in 2022 for about 105 million marks. The price, therefore, is the same as the price of coal procured by the current management. However, the difference lies elsewhere.

The price of coal, namely, makes up 70 percent of the production cost of electricity. Given that last year, due to the high market price, Elektroprivreda BiH could sell surpluses for about 280 euros per megawatt, the procurement of coal from Lager was more than profitable. However, the market price of electricity has now fallen drastically and at times is around 100 euros. This means that Elektriprivreda BiH will earn almost nothing, regardless of whether it sells all the produced energy as "surpluses".

Therefore, the fall in electricity prices on the market and Konaković's and Žuljević's "restrictions" from 2021 could cost the entire electricity sector. Furthermore, this has no direct connection with the current management of Elektroprivreda BiH appointed by Nermin Nikšić's Government. It is solely related to the populism of Aner Žuljević and Elmedin Konaković, who endangered the entire electricity system of BiH with their amendments from 2021.