Albania: Wholesale Electricity Trading In Albania: A Basic Primer To Electricity And Gas Wholesale Trading

A. Wholesale electricity trading

1. Background information

Albania has undergone deep reforms to adapt and open its electricity market to competition and to align the legal framework to the EU legislation.

Albania is a member of the Energy Community Treaty.1 The general objective of the Energy Community Treaty is to create a stable regulatory framework in the EU neighbouring countries aligned with the EU energy policies.

The Power Sector Act (Ligji për Sektorin e Energjisë Elektrike) ) defines the fundmental rules with regard to the energy market, including the supervising and licensing competences of the Albanian NRA (Enti Rregullator i Energjisë – ERE ). Secondary legislation such as the Electricity Market Model (Modeli Shqiptar i Tregut) and the Electricity Market Rules (Rregullat e Tregut Shqiptar te Energjise Elektrike -MR), complete the legal framework and rules applicable to market participants.

2. Licence requirements

2.1. General aspects

Pursuant to the Power Sector Act, all companies buying and selling electricity at the wholesale level in Albania must hold a valid licence issued by the ERE in accordance with the provisions of the Energy Act and the Regulation on Procedures for Licensing, Modification and full or partial Transfer and Renewal of the Licences (Rregullorja për proçedurat e liçensimit, ndryshimit, transferimti te plote /te pjeseshem dhe rinovimit te licensave – Licensing Regulation ).

2.2. Conditions for licensing

Generally, the issuance of a licence is linked to numerous technical, organisational and financial criteria.

In addition, the Licensing Regulation stipulates that the market participant should provide proof of registration to the Albanian Commercial Register held by the National Registration Centre (NRC). Branches or representative offices are not considered sufficient to become a market participant, based on the Act on Entrepreneurs and Commercial Companies (Ligji për Tregtarët dhe Shoqëritë Tregtare); ); limited liability companies and joint-stock companies are the primary choice of new market participants. Since there is no limitation with regard to foreign ownership in Albanian companies, all the shares/quotas in the Albanian subsidiary can be fully owned by a foreign entity.

2.3. Timetable and fees for obtaining the licence

The ERE shall notify the applicant whether the application was approved or rejected within 15 days from the submission. The ERE will then adopt the final decision on granting the licence within three months from the approval of the application. The wholesale gas trading licence may be modified, transferred or renewed with the prior approval of the ERE.

The licence can also be issued to entities licensed for power generation. In that case the licence shall have equal duration with the licence for the generation of energy, ie up to 30 years.

There is a small application fee of approximately EU 70 (ALL 10,000).

3. Trading requirements

3.1. General aspects

Currently there is no power or commodity exchange set in place and wholesale power trading is exclusively based on bilateral contracts.

3.2. Market Participation Agreement

After obtaining the trader licence issued by the ERE, in order to become a market participant the Electricity Trader submits a registration request to the TSO in accordance with the provisions of the Electricity Market Rules. The TSO will evaluate and approve the request within 10 days. The approval should result in the signing of a Market Participation Agreement between the trader and the TSO and registration with the power market commercial registry held by the TSO.

3.3. Financial Guarantees

Each licensed trader shall provide a financial guarantee as stipulated by the Regulation on Financial Guaranties of the Participants for the Registration in the Electricity Market (Rregullave per garancite financiare te pjesmarresve per rregjistrimin ne tregun e energjise elektrike - Fi¬nancial Guaranties Regulation ) in the form of a precondition to sign the Market Participation Agreement and become a market participant.

The amount of the guarantee sum payable into a bank account in Albania is calculated on the basis of 5% of the foreseen monthly program multiplied by ALL 10/kWh. Pursuant to the provisions of the Financial Guaranties Regulation, however, there is a minimum floor and maximum cap of ALL 500,000 (approx EUR 3,600) and ALL 10,000,000 (approx EUR 72,000), respectively.

3.4. Balancing Market

The Albanian balancing market is operated by the TSO. The balancing capacities are provided by KESH-Gen, the state-owned generating company. The TSO as a market operator also organises the payment settlements.

In its capacity as system dispatch operator the TSO also controls and manages the imbalance in the system utilising balancing market capacities in accordance with the Electricity Market Rules.

4. Cross-border trading

The current Albanian grid system is made up of national and international interconnection lines. The entire grid system is under state ownership, although some interconnection lines are expected to be constructed and operated by private investors.

The Albanian cross-border lines include one line (400 KW) with Greece, two (220 KW and 400 KW) with Montenegro and one (220KW) with Kosovo.

The transmission system operated by the TSO is based on multiparty or bilateral agreements and in line with technical standards and safe operation requirements established by the provisions of the Grid Code, ERE bylaws as well as the criteria of the European Network of Transmission System Operators for Electricity.

Pursuant to the Electricity Market Rules and the Regulation on the Interconnection Allocation Capacities (Rregullore per Alokimin e Kapac¬iteteve te Interkonjeksioneve - Regulation on Capacities Allocation), 25% of the grid capacity is allocated to the Wholesale Public Supplier and 50% to CEZ Distribution. The remaining interconnection capacities are auctioned by the TSO to the remaining market participants on annual, monthly and daily bases, with the possibility to be transferred to any third parties upon the TSO's approval.

5. Grid access

Pursuant to the Power Sector Act, non-discriminatory access to the distribution and transmission system is granted to all licensed market participants. Based on the market rules and the ERE regulations, access to the system may only be refused if such access could disrupt the technical conditions and the security of the networks, as well as result in deterioration of the conditions of other market participants.

B. Wholesale gas trading

1. Background information

Following the power sector, several legal reforms have been adopted to also open the Albanian gas sector to the European Union and foreign investors. However, the gas market remains underdeveloped and mostly a monopoly. The market is currently monitored and regulated by the state through ERE and the Central Technical Inspectorate (CTI).

Since Albanian gas resources are substantially lower than the consumption, much of the domestic demand is covered by imports, which is mostly deposited in storage facilities located on the Albanian coast.

The rules and policies with regard to the gas sector and gas trade are defined by the Law on the Natural Gas Sector (Ligji për Sektorin e Gazit Natyror - Natural Gas Act), the Law on Processing, Transportation and Trading of Oil, Gas and their Sub-Products (Ligji për përpunimin, trans¬portimin dhe tregtimin e naftës, të gazit dhe nënprodukteve të tyre - Oil and Gas Trading Act) and the Regulation on Procedures for Licensing, Modification and full or partial Transfer and Renewal of Licences in the Natural Gas Sector (Rregullat dhe Procedurat për Liçensimin, Ndryshim¬in, Transferimin e Pjesshëm ose të Plotë, Heqjen dhe Rinovimin e Liçen¬save në sektorin e Gazit Natyror - Natural Gas Licensing Regulation).

ERE acts as NRA for the gas market as well.

2. Licence requirements

2.1. General aspects

Gas trading activities may only be conducted by legal entities duly licensed by the ERE to perform such activities pursuant to the Natural Gas Act and the Natural Gas Licensing Regulation.

2.2. Licensing requirements

Generally, the issuance of a gas trading licence is linked to numerous technical, organisational and financial criteria.

In order to obtain a gas trading licence and operate on the Albanian gas market it is necessary to have a legal entity incorporated and registered with the Albanian Commercial Register kept by the NRC in accordance with the Company Law provisions. The Natural Gas Licensing Regulation does not specify the form of the entity; however, the most common forms of entering the gas market are either an LLC or JSC.

2.3. Timetable and fees for obtaining the licence

The ERE shall notify the applicant whether the application was approved or rejected within 15 days from the submission. The ERE will then adopt the final decision on granting the licence within three months from the approval of the application. The wholesale gas trading licence may be modified, transferred or renewed with the prior approval of the ERE.

3. Trading requirements

Pursuant to the Oil and Gas Trading Act wholesale gas trading can only be carried out by joint-stock companies holding a gas trading licence.

Currently there is no commodity exchange set in place and wholesale gas trading is exclusively based on bilateral contracts.

The TSO ensures the balancing of the system in accordance with the Balancing Rules approved by the ERE and implements non-discriminatory, transparent and market-based capacity allocation mechanisms.

4. Cross-border trading

Albania currently does not have interconnection gas pipelines, but large cross-border projects such as the Trans-Adriatic Pipeline (TAP) and Ionian Adriatic Pipeline (IAP) are under development. Most of the cross-border trade is performed through the sea route via storage facilities and LNG terminals operated by private licensed operators.

5. Grid access

The Albanian legislation grants third parties non-discriminatory access to the gas system. The TSO and DSO are responsible for maintaining the system and must provide access to third parties in the system within the limits of their transmission and distribution capacity and under the condition that they meet the requirements of the technical rules. The TSO and DSO can refuse entry to the system due to:

  • lack of capacity;
  • such entry possibly causing negative effects on the implementation of their public service obligations; and
  • serious economic and financial difficulties to take-or-pay contracts effective before the application date for entry into the system.

Licensed operators of storages and LNG facilities will connect the storage area or terminal to the transmission system and provide access to all market participants.

According to the Natural Gas Act, operators of storages may refuse access to third parties if:

  • grating access would be economically and technically impossible.

The operators of the LNG terminals may refuse access to third parties if:

  • ERE has provided exclusive rights to use the site; or
  • there are financial problems related to the take-or-pay contracts.

Footnotes

1. Treaty establishing the Energy Community was signed in October 2005 in Athens, Greece. It entered into force on 1 July 2006.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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