Kosovo: Energy 2019 | Kosovo

Last Updated: 25 December 2018
Article by Boga & Associates

Jurisdiction particularities of the Republic of Kosovo

Until 2008, Kosovo was administered by the United Nations Interim Administration Mission in Kosovo (UNMIK). The mandate of UNMIK was established by the Security Council in its resolution no. 1244 (1999), [https://unmik.unmissions.org/united-nationsresolution- 1244] aiming to help ensure the conditions for a peaceful and normal life for all inhabitants of Kosovo and to advance regional stability in the Western Balkans.

Kosovo declared independence on 17 February 2008 and adopted its constitution on 15 June 2008. The Constitution of the Republic of Kosovo (art. 143) makes reference to the Comprehensive Proposal for the Kosovo Status Settlement of 26 March 2007 produced by the Special Envoy, Mr. Martti Ahtissari, in line with UN Resolution no. 1244 (1999) [ http://www.kuvendikosoves.org/common/docs/Comprehensive%20Proposal%20.pdf]. The Parliament of the Republic of Kosovo enacted the Law on Publicly Owned Enterprises (law no. 03/L-087 as amended), which paved the way for the privatisation of publicly owned enterprises (POE).

Serbia challenged the independence of Kosovo before the International Court of Justice but, according to the Court's opinion, Kosovo's declaration of independence did not violate any applicable rule of international law.

Privatisations and unbundling of distribution and supply of electricity

From October 2006 until 8 May 2013, the generation, distribution and supply of electrical energy in Kosovo was owned, controlled and carried out by Korporata Energjitike e Kosoves SH.A / Kosovo Energy Corporation J.S.C. (KEK), incorporated in 2005 as a fully integrated, state-owned company. All energy assets on the territory of Republic of Kosovo, including assets in the northern part of Kosovo, were transferred to KEK upon its incorporation.

The Government of the Republic of Kosovo and KEK completed the unbundling of the distribution system operation and supply functions into Kompania Kosovare per Distribuim dhe Furnizim me Energji Elektrike SH.A. / Kosovo Electricity Distribution and Supply Company J.S.C. (KEDS), which shares were acquired in a competing privatisation process by a consortium of two Turkish private groups, Limak and Çalik. This process was successfully finalised on 8 May 2013.

On 1 January 2015, the licensed supply activities were transferred from KEDS to Kosovo Electricity Supply Company J.S.C. (KESCO), a company newly established by the same consortium, Limak and Çalik. Functional unbundling was completed by the adoption of a appointment of a compliance programme by Kosovo Energy Regulator Office (ERO) in July 2015 and the compliance officer.

Therefore, KEDS operates only as a distributor system operator (DSO) licensed to carry out its activity covering the entire territory of the Republic of Kosovo.

Opening of the energy market

Kosovo* together with Albania, Bosnia and Herzegovina, FYROM, Georgia, Moldova, Montenegro, Serbia and Ukraine, is a member of the Energy Community (an international organisation founded under the Treaty establishing the Energy Community signed in October 2005 in Athens, Greece, in force since July 2006). The key objective of the Energy Community is to extend the EU internal energy market rules and principles to countries in South East Europe, the Black Sea region and beyond, on the basis of a legally binding framework.

Kosovo has reached a high level of compliance in the electricity sector legal framework. In June 2016, the Parliament of Kosovo adopted:

  1. the Law on Energy (Law No. 05/L-081), transposing partially Directive 2009/72/EC on common rules for the internal market in electricity, the Regulation No. 714/2009/ EC on conditions for access to the network for cross-border exchanges in electricity, and Directive No. 2009/28/EC concerning promotion of the use of energy from renewable energy sources;
  2. the Law on Electricity (Law No. 05/L-085), transposing partially the Directive No. 2009/72/EC on common rules for the internal market in electricity and the Regulation No. 714/2009/EC on conditions for access to the network for cross-border exchanges in electricity; and
  3. the Law on Energy Regulator (Law No. 05/L – 084), transposing partially the Directive 2009/72/EC on common rules for the internal market in electricity, the Regulation No. 714/2009/EC on conditions for access to the network for cross-border exchanges in electricity, Directive No. 2009/73/EC on common rules of the internal European natural gas market Regulation No. 715/2009/EC on conditions of access to natural gas transmission networks, and Directive No. 2009/28/EC concerning promotion of the use of energy from renewable energy sources.

In addition to the above, the secondary legislation necessary for opening of the market was also adopted.

The Law on Electricity sets common rules for the generation, transmission, distribution, supply, trade and organised market, as part of the regional and European electricity markets, and establishes rules for: the access of parties in the market; public service obligations; consumer rights; and competition conditions. The law transposes the requirements for ownership unbundling of the transmission system operator in line with the acquis. Therefore, the Government of Kosovo owns the generation company KEK, while the Parliament controls the transmission system operator Operator Sistemi, Transmisioni dhe Tregu – KOSTT SH.A. As mentioned above, the unbundling of the distribution system operator KEDS from supply activities has been already completed.

According to the Law on Electricity, all customers are eligible to freely choose a supplier of their choice. The law establishes general principles of supplier switching based on which ERO adopted the relevant rules in October 2016.

In addition, the law limits regulation to supply prices for household and small customers under universal service. ERO reassesses annually the price methodology, the level of prices and the need for further regulation.

In January 2017, ERO issued a guideline for liberalisation of the market, which terminated regulation of the generation price on 31 March 2017. The guideline also includes an action plan for the deregulation of retail prices. Transmission and distribution system operators have started to procure electricity for network losses at non-regulated prices.

ERO started to issue supply licences, resulting in three licensed suppliers so far. By the decision of ERO, KESCO was entrusted with universal supply obligations and remunerated based on tariffs approved by ERO.

A tender for the appointment of a supplier of last resort was announced by ERO in accordance with the Law, however, it appears that no application has been submitted so far. It also appears that the rules are reflected properly in the paper, nevertheless it remains to be seen whether new players entering the market will benefit from the opening.

Originally published by Global Legal Group Ltd, London.

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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