Albania: Albania To Introduce The Albanian Power Exchange: An Important Step For Power Market Liberalization

Last Updated: 12 December 2016
Article by Flavia Xhafo

Introduction

The rules governing the power sector in Albania have undergone substantial changes in the last years. This is mainly the result of Albania's obligations undertaken in the context of the Stabilization and Association Agreement with the European Union ("EU"), and the Energy Community Treaty ("EnC Treaty").

Pursuant to such obligations, on 30 April 2015 the Albanian Parliament adopted the new Power Sector Law no. 43/2015, which transposed the Third Energy Package of the EU acquis (including full transposition of Directive 2009/72/EC, 13 July 2009 concerning common rules for the internal market in electricity). The new Law set forth objectives and rules concerning (a) the organization and functioning of a fully open power (electricity) market; (b) the improvement of participation in such a market; (c) customer protection, security of supply and establishment of competitive market structures; as well as (d) the integration of the Albanian market in the regional and European electricity markets.

On the basis of the general framework established by the new Power Sector Law, the Council of Ministers recently approved the new Albanian Power Market Model ("AMM") (Council of Ministers' Decision no. 519, dated 13 July 2016).

Concrete steps toward the establishment of the Albanian Power Exchange

In view of the new rules to establish a liberalized and competitive electricity market, one of the significant novelties brought by the new Power Sector Law was the introduction of a power market that is composed not only of direct trading between market participants on the basis of bilateral contracts, but also of an organized platform for trading power on a day-ahead and/or intra-day basis (i.e. through a power exchange). In that context, the Law entitled electricity traders and suppliers registered in the member states of the EnC Treaty to participate in the Albanian electricity market based on the principle of reciprocity.

Most importantly, the recently approved AMM introduced concrete steps towards the creation and functioning of the Albanian Power Exchange ("Albanian PX"). This is an important milestone towards the liberalization and promotion of a fully competitive power market in line with Albania's obligations under the Third Energy Package. is is also expected to improve the reputation of Albania as a trading country, as well as to guarantee the quality and sustainability of its power services and long-term financial stability. To that effect, the AMM aims for the alignment of the process of establishment of the Albanian PX with the best EU practices and for an active and supportive role of the EnC Secretariat in that regard. Along the same line, the AMM paves the way for the Albanian PX to become signatory of the Memorandum of Understanding of Western Balkan 6 on regional electricity market development and establishing a framework for other future collaboration – a process that ultimately supports the integration of the Albanian market into the day-ahead regional and European markets.

According to the AMM, the Albanian PX shall be established as an Albanian legal entity responsible for the functioning of the organized electricity market. Initially, it shall collect bids from market participants and carry out the compatibility and liquidation of wholesale power products on an hourly basis. More generally, the Albanian PX shall accept bids for the trading of energy from balancing responsible parties (i.e. market players that have an implicit responsibility to forecast their production and consumption), process interconnection capacities from the Transmission System Operator ("TSO"), carry out auctions and commercial operations using the European market coupling algorithms, publish the distributed amounts and the respective prices, guarantee the accessibility of the commercial platform from all interested parties, etc. It bears emphasis that all market participants registered in the Albanian PX shall be entitled to carry out their trading activities without any limitations of public service obligations.

The direct institutional responsibility for taking the necessary measures and preparing the relevant acts for the establishment of the Albanian PX shall rest with the Minister of Energy and Industry ("the Minister") and the TSO. The Minister shall lead the process of establishing and structuring the ownership of the Albanian PX on the basis of the following action plan already incorporated in the AMM:

  • within 1 September 2016, the Minister establishes within the TSO a unit, which shall prospectively constitute the core unit of the Albanian PX. The core unit shall prepare the necessary legal basis and documentation for the establishment of the PX and its licensing from the ERE, as well as the cooperation agreements with partner companies in the regional and European markets;
  • within 31 December 2016, the core unit shall propose to the Minister the aforementioned legal basis and documentation, including the organizational chart of the company to be established as a PX;
  • within 31 March 2017, the Minister shall decide for the establishment of the Albanian PX. The TSO shall look for possible shareholders and operators of the PX among service providers with international experience. The Albanian PX shall be however open to other shareholders, including neighboring TSOs, should the initial shareholders so request.
  • as of 30 June 2017, the Albanian PX shall be ready to commence operations in accordance with the AMM, and
  • within 31 December 2017, the Minister shall decide for the commencement of operations of the Albanian PX, upon compliance by the latter with all legal, technical and regulatory issues required for the implementation of the AMM.

Conclusions

The recently approved Albanian Market Model and the concrete steps for launching the Albanian Power Exchange, show both a serious and challenging commitment of the Albanian government. While this commitment should facilitate incoming foreign direct investment in the energy sector, it remains to be seen whether there will be a smooth and timely implementation of the action plan and the launching of the Albanian PX within 31 December 2017.

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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