Focus on Energy, 2010 - Karanovic & Nikolic

BiH fully satisfies its demands for Electric Power consumption and also exports electric power. The exportof Electric Power accounts for 8.1% of BiH’s total exports. Energy production capacities are not fully exploitedand there is great potential for new power plants that would significantly increase production. Inorder to illustrate the potential for production it is worth noting that the hydro potential of RS is 10,027.5GWh/per year, but only 2,985.8 of this has been utilised, whilst 7,041.7 GWh/per year is still availablefor utilisation. The total estimated hydro potential in BIH is estimated to be somewhere in the region of23,395 GWh/per year 2 .The governments of both entities in BIH declared strong support for investments in the sector with themain focus on new production facilities, the improvement of existing facilities and energy efficiency.Electric PowerOVERVIEWThis area has under taken significant reforms of late. These reforms include the adoption of new primaryand secondary legislation 3 as well as the establishment of new institutions. The underlying aims of thereforms were to harmonize the energy sector in BIH with that of the European standards, especially withregards to the opening up of the energy market.Activities such as (i) the production of electric energy and the supply to buyers connected to the transmissionor distribution grids that are authorized to buy electricity through their own choice (“Qualified Buyers”)as well as (ii) the production of electric energy from producers not involved in the transmission anddistribution of electric energy in the area where they operate for further sale (“Independent Producers”)are performed in accordance with market principles that provide that parties are free to agree the termsand conditions of their agreements.57Alternatively, activities such as the production and trade of electric energy for buyers with whom the tradeof electricity is performed in accordance with regulated criteria and under regulated tariffs (“Non-QualifiedBuyers”) is performed under controlled terms and conditions. However, in such an instance, authoritiesmay impose that an investor be required, to a certain extent, to provide and trade electricity in the bestinterests of the public. This is a risk for an investor that only wants to supply Qualified Buyers that operateunder regulated tariffs. Accordingly, it is advisable to regulate this relationship with the competent authoritiesfrom the word go, and to the greatest extent possible, starting with the concession agreement itselfand then further down the road of negotiations and administrative procedures related to the project.The Regulatory Commission for Energy of the RS (“RCERS”) and the Regulatory Commission for Electricityof the FBIH (“RCEFBH”) are cooperating and are interconnected in their competences from a practicalpoint of view with the Independent System Operator in Bosnia and Herzegovina (“ISO BIH”) (www.nosBH.ba) and the Company for the Transmission of Electricity in Bosnia and Herzegovina (“Elektroprenos- Elektroprijenos a.d.”). (www.elprenosBH.ba).FOCUS ON ENERGYDEVELOPMENT PRIORITIES AND PROJECTSEnergy has been recognized as a potentially lucrative resource for BIH’s economy. Accordingly, the governmentand primarily the governments of RS and FBIH have initiated the development of strategies for theenergy sector.The Government of RS has commenced the development of the RS “Energy Development Strategy” that isexpected to be completed this year. The Government of RS has already granted more than 100 concessionsfor small hydro power plants, but most of them are lagging behind with regard to their construction.2 Source: „Distributed production of electric power in BIH“, Author Mr. Vinko Bosnjak3 The Law on Transmission of Electric Power, Regulator and System Operator of BIH (Official Gazette of Bosnia and Herzegovina Nos 7/02, 13/03and 76/09), the Law Establishing the Company for the Transmission of Electric Power in BIH (Official Gazette of BIH Nos. 35/04 i 76/09), The LawEstablishing an Independent System Operator for the Transmission System in BIH (Official Gazette of BIH No. 35/04)