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Improving the Operational Tools of Serbia’s Natural Gas Market

Improving the Operational Tools of Serbia’s Natural Gas Market

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The Third Energy Package and its solutions directed towards the enhancement of competition in and the development of electricity and natural gas markets became part of Serbian law by the adoption of the country’s Energy Law in 2014. The network codes that were adopted after the adoption of the Third Energy Package further contribute to competition and market development. The obligation of the Republic of Serbia to adopt these acts arises from the 2008 Agreement on Stabilization and Association with the EU and the 2006 Energy Community Treaty. Until these codes are implemented through amendments to the Serbian Energy Law, the principles, solutions, and tools contained within them can be implemented in the individual network codes of each transmission system operator via a public procedure set out by the Energy Law.

Existing natural gas transmission system operators have not yet amended yet their applicable network codes and consequently have not yet implemented the goals, principles, and requirements set out by the EU’s network codes. This delay has been justified by reference to the expected amendments to the Energy Law. However, the new transmission operator – Gastrans d.o.o. Novi Sad – has invested significant effort in implementing the solutions and tools envisaged by Capacity Allocation Mechanisms Network Code 2017 (CAM NC) into its network code, which was adopted in April 2020. Novelties introduced by Gastrans network code include, inter alia, an allocation methodology, an auctions schedule, and an algorithm, which are already widely applied in the EU. Additionally, the Gastrans network code makes the Hungarian Regional Booking Platform its capacity booking platform so that the users of Gastrans transmission system can book and trade with capacities in its pipeline.  The Hungarian Regional Booking Platform is one of few capacity booking platforms established in line with Article 37 of CAM NC.

The introduction of principles, solutions, and tools set out by CAM NC in Serbia represents an important mechanism for enhancing competition in and developing Serbia’s natural gas market. In particular, the operating mechanism ensures that all participants in Serbia’s natural gas market bid for pipeline capacity under the same terms and conditions in a simplified procedure and use an electronic platform which applies a prompt, accurate, and un-biased algorithm for allocating capacities and ensuring all the benefits of advanced digital tools to transmission system operators and users. Furthermore, the impartial and competition-supported approach is further guaranteed by entrusting the allocation of capacities to an independent third party. Harmonizing the auction schedule with the EU auction calendar allows the widest range of natural gas users to simultaneously book necessary capacities in all transmission systems of interest, while decreasing the risk for natural gas traders and consequently facilitating the natural gas trade and enabling the entry of new players on Serbia’s natural gas market. Additionally, pipeline users will be able to trade with natural gas capacities on the secondary market in an equally efficient, transparent, and economically beneficial manner using the Hungarian Regional Booking Platform as a one-stop shop.

The introduction of such novel operational tools has been part of the public procedure, which allows all current and future natural gas transmission users the opportunity to provide their comments and proposals to the proposed draft, with an equal right given to the Serbian energy regulator and Energy Community Secretariat. Both regulatory stakeholders supported the new provisions of the Gastrans network code.

It is expected that the solutions, principles, and tools introduced in the Gastrans network code will serve as a model for the other two existing transmission system operators in Serbia and the region when they amend their own network codes, resulting in the modernization of Serbia’s natural gas market and its further harmonization with EU requirements.

By Jelena Gazivoda, Senior Partner, and Nikola Dordevic, Partner, JPM Jankovic Popovic Mitic

This Article was originally published in Issue 7.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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