Electricity law and regulation in Bosnia and Herzegovina

1.1.1 Certain introductory remarks regarding the territorial and political structure of Bosnia and Herzegovina (BiH) are necessary for an understanding of the electricity sector.

1.1.2 BiH is territorially and administratively divided into two entities and one district: the entity of Federation of Bosnia and Herzegovina (FBiH), the entity of Republika Srpska (RS) and Brčko District (BD), which is not an entity but has a specific status and is a self-governing administrative unit under the sovereignty of BiH. FBiH is further divided into ten cantons, and the cantons are further divided into municipalities. RS is also further divided into municipalities (it has no cantons).

1.1.3 The state of BiH, FBiH, RS, BD and the cantons all have their own constitution, government and parliament. Each of these levels of governance has its own separate competences, which depend on the division of powers in the Constitution of BiH, the constitutions of the entities and the Statute of BD. Energy is in the primary competence of the entities, however certain issues necessary for the functioning of the energy sector on state level have been transferred to the competence of BiH.

1.1.4 This means that the regulation and functioning of the electricity sector is very divided: there are three electricity regulators (one at the state level and one each at the level of FBiH and RS) and three state-owned incumbent electricity operators (one in RS and two in FBiH). While there are also relevant electricity-related governmental bodies both on the level of the entities, BD and on the state level of BiH, BD does not have a separate electricity regulator but is under the jurisdiction of the state level regulator.

Implementation of EU law

1.2.1 Although not part of the European Union, as a State Party of the Energy Community, BiH has an obligation to implement the Energy Community acquis communautaire on energy, environment, competition and renewables, which comprises the core EU energy legislation in the area of electricity, gas, environment, competition, renewables, energy efficiency, oil and statistics, as provided by the Energy Community Treaty.

1.2.2 BiH has not yet fully and adequately implemented the acquis of the Energy Community. There is currently no state level legislation or strategy regarding energy from renewable sources, and therefore the implementation of Directive 2001/77/EC 1 Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market. , as well as Directive 2009/28/EC 2 Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC.  is fragmented and inconsistent, as each of the entities (FBiH and RS) defines its own framework for the transposition of the directives and both entities have laws governing the electricity sector and regulatory requirements to foster production of energy from renewable sources.

Current structure

1.2.3 Although formally defined as a “single economic space”, the BiH electricity sector is characterised by fragmentation and a complex administrative, legislative and regulatory structure, as practically three parallel structures operate in the territory of BiH.

1.2.4 Regulation of the electricity market in BiH is divided and performed by three regulators with different jurisdictions: the state level operator, the State Electricity Regulatory Commission (DERK), the regulator for the territory of FBiH, the Regulatory Commission for Electricity in FBiH (FERK) and the regulator for the territory of RS, the Regulatory Commission for Energy of RS (RERS). There is also an independent state level system operator, the Independent System Operator in BiH (NOS BiH) and a state level electricity transmission company, Elektroprenos BiH, which owns electricity transmission assets.

1.2.5 BiH has three incumbent electricity generating companies: JP Elektroprivreda BiH, covering the majority Bosniak part of the Federation of BiH; JP Elektroprivreda HZHB, covering the majority Croat part of the Federation of BiH; and MP Elektroprivreda RS, covering RS. No electricity is produced in BD by these companies.

1.3.1 The main players in the electricity sector are the three incumbent electricity operators, the three regulators, NOS BiH and Elektroprenos BiH. The relevant electricity legislation is generally broadly framed and regulators, especially DERK as the state level regulator, generally have wide powers.

1.3.2 Private investors own a number of small hydroelectric generating stations and a few photovoltaic generating stations. More private-investment generating stations are being built or are planned, including several biomass generating stations and wind farms.

1.3.3 None of the incumbent electricity companies have been privatised and they are exclusively or almost exclusively owned by the entities. JP Elektroprivreda BiH and JP Elektroprivreda HZHB are owned by the FBiH (owning 90% of the shares in each company, with 10% of shares in each company being owned by minority shareholders), while MP Elektroprivreda RS is fully owned by RS.

1.3.4 The incumbent electricity companies are vertically integrated and combine generation, distribution and trading activities. All of the incumbent electricity companies perform electricity distribution activities through subsidiaries or related companies. JP Elektroprivreda BiH and MP Elektroprivreda RS have majority shareholdings in several coal mines in BiH which they primarily use for their own coal generating stations. Currently, there are no plans to privatise any of the incumbent electricity companies.

1.3.5 Komunalno Brčko is the only company responsible for electricity distribution and supply in BD. However, it does not have any electricity generation capabilities and relies on the incumbent operators for electricity needs. This is arranged annually and in 2014 the electricity will be supplied by MP Elektroprivreda RS.

Unbundling

1.3.6 JP Elektroprivreda BiH and JP Elektroprivreda HZHB are vertically integrated companies which are involved in electricity generation, distribution, supply and trade. Legal unbundling is not yet implemented. The Electricity Law of FBiH and the statutory acts of JP Elektroprivreda BiH and JP Elektroprivreda HZHB impose separate accounts, however accounting unbundling is still not properly implemented. On the other hand, legal unbundling in RS is relatively advanced. MP Elektroprivreda RS controls eleven legally unbundled subsidiaries (five distribution utilities, five generation companies and a research centre).

1.3.7 The electricity transmission system in BiH has been legally unbundled since 2004, and is under the control of NOS BiH and Elektroprenos BiH, which are under the regulation of DERK. The legal unbundling of the transmission from generation and supply is in compliance with the acquis of the Energy Community. However, the legal unbundling has not provided sufficient independence in the operation of the transmission system in BiH. The practical operation of NOS BiH and Elektroprenos BiH is inefficient because of a lack of capacity allocated to the management structure of Elektroprenos BiH for independent decision-making, and because of a lack of interest by FBiH and RS in overcoming mutual disagreements relating to the operational structure and investments.

1.4.1 There are several contentious issues in the electricity sector in BiH, such as the political dispute and standstill between FBiH and RS regarding the operation of Elektroprenos BiH and use of its accumulated profits. Discussions are ongoing regarding this matter and it is expected to be resolved in the near future.

1.4.2 Other issues concern the adoption of new legislation in the energy sector, especially concerning the issue of renewable energy where new legislation has been adopted in FBiH and RS during 2013.

Structure of generation sector

2.1.1 BiH has three incumbent electricity generating companies:

1. i. JP Elektroprivreda BiH, covering the majority Bosniak part of FBiH and generating approximately 50% of the electricity in BiH;
2. ii. JP Elektroprivreda HZHB, covering the majority Croat part of the FBiH and generating approximately 10% of the electricity in BiH; and
3. iii. MP Elektroprivreda RS, covering RS and generating approximately 40% of the electricity in BiH. MP Elektroprivreda RS also currently supplies electricity for the territory of BD, but the incumbent companies do not currently generate electricity in BD.

Energy mix

2.1.2 Electricity generation in BiH relies almost exclusively on coal-powered generating stations (60%) and hydroelectric generating stations (40%). However, this can vary, and in 2011 and 2012 the ratio was somewhat higher in favour of coal-powered generating stations due to extremely low levels of precipitation.

2.1.3 The main coal-powered generating stations in BiH are TE Tuzla and TE Kakanj, owned by JP Elektroprivreda BiH; and TE Gacko and TE Ugljevik, owned by MP Elektroprivreda RS. JP Elektroprivreda HZBH does not own any coal-powered generating stations. JP Elektroprivreda BiH has plans to increase production in TE Tuzla and TE Kakanj by constructing additional units (with an installed power capacity of 450MW in TE Tuzla and 300MW in TE Kakanj) by 2018 and 2019 respectively. In RS, the Comsar Energy Group (through a joint venture in which the government of RS holds a 10% share) is constructing a new coal-powered generating station next to TE Ugljevik with an installed power capacity of between 600 and 660MW, intended to be used for the export of electricity and is planned to be completed in 2015 (TE Ugljevik 3). The energy trading and investment group EFT is also planning to construct a new coal-powered generating station with an installed power capacity of 300MW near Doboj (TE Stanari), to be completed in 2016.

2.1.4 The main hydroelectric generating stations in BiH are: HE Salakovac and HE Jablanica, owned by JP Elektroprivreda BiH; HE Čapljina and HE Rama, owned by JP Elektroprivreda HZHB; and HE Višegrad and HE Trebinje I, owned by MP Elektroprivreda RS. Both JP Elektroprivreda BiH and MP Elektroprivreda RS also have plans to construct new hydroelectric generating stations.

Structure of transmission sector

2.2.1 The electricity transmission system in BiH has been legally unbundled since 2004, and is incorporated into two separate companies that are under the joint ownership of FBiH and RS, NOS BiH and Elektroprenos BiH. These companies are under the regulation of DERK, the state electricity regulator. Technically, the transmission system is well capacitated. The transmission network (110kV, 220kV and 400kV) is owned by the company Elektroprenos BiH, which holds ownership of the transmission assets, establishes connections and carries out the metering, transmission of data and maintenance and development of the network. Elektroprenos BiH owns 864.73km of 440kV overhead power lines, 1,524.80km of 220kV overhead power lines and 3,837.93km of 110kV overhead power lines. It also owns nine 400kV substations, eight 220kV substations and 125 110kV substations. 3 Elektroprenos BiH, Grid technical data (accessed 1 June 2013)

2.2.2 However, there is a management and decision-making stalemate in Elektroprenos due to disagreements of the entity governments over the use of the company’s funds and investment in infrastructure, and the situation is likely to be resolved by a proposed change of the Law Establishing the Company for the Transmission of Electric Power in BiH regarding the use of the company’s profits. Under the Law on Elektroprenos, the profits of Elektroprenos could not be distributed for a period of ten years from the adoption of the law and had to be reinvested in the company’s infrastructure. However, this was never done and there is currently political disagreement over the use of the profits of Elektroprenos which has led to a deadlock of the funds until agreement is reached. It is not known when this issue will be resolved.

2.2.3 Third party access to the transmission network is regulated on a state level by DERK, which has adopted corresponding rules and is also responsible for appeals regarding third party access. It has established transmission tariffs and connection rules, such as defining the administrative procedure, obligations, limitations and structure of costs for the connection of generators and customers to the high voltage transmission network directly or through the medium voltage networks of the distribution grid. Elektroprenos BiH is responsible for managing connections to the grid.

2.2.4 DERK is responsible for setting regulated transmission network tariffs. It adopts and publishes the tariffs for transmission (cost of services of Elektroprenos BiH), system operation (cost of services of NOS BiH), balancing costs and costs of ancillary services (provided by NOS BiH). DERK is also responsible for authorising new transmission infrastructure. Elektroprenos BiH has the obligation to prepare a long term transmission network development plan, also covering new cross-border lines to be developed every year for a ten year period. This plan is revised by NOS BiH and approved by DERK.

2.2.5 The operation of the transmission network is administered by NOS BiH, which is responsible for the dispatching, balancing and operation of the system and cross-border capacity allocation. The balancing responsibility includes identification of each network connection, its corresponding beneficiary and its allocation to one of the registered balance responsible parties. The balance responsible party assumes responsibility for financial settlement of the costs of imbalance of its group of market participants (beneficiaries), including its own imbalance. The electricity used for balancing is provided by the incumbent electricity companies under regulated costs.

Cross-border issues

2.2.6 The transmission network of BiH Herzegovina is interconnected with the systems of Croatia, Serbia and Montenegro. Cross-border flows include significant transits, typically 25% on average. NOS BiH is allowed to use balancing energy from abroad if required, with a priority right for the required cross-border capacity, and under the clearing price. With this model the balancing environment is fully regulated and practically isolated from competition. No regular market-based balancing instruments are available and there is no legal provision for enforcement of any obligation for development of a market-based balancing instrument. Currently the only balance responsible parties are the three incumbent electricity companies, each one being responsible for the imbalances of its own customers.

Structure of distribution sector

2.3.1 The distribution system operation in BiH is legally bundled with supply in all distribution companies in BiH. There is no provision in any law transposing the obligation for unbundling of distribution.

2.3.2 Distribution of electricity is performed by MP Elektroprivreda RS (through its distribution subsidiaries) in the territory of RS, and by JP Elektroprivreda BiH and JP Elektroprivreda HZHB (through their distribution subsidiaries) in the territory of FBiH.

2.3.3 Licences for distribution of electricity are granted by RERS and FERK respectively. The distribution areas of JP Elektroprivreda BiH and JP Elektroprivreda HZHB are regulated in their licences and do not overlap. Distribution of electricity in BD is performed by the company JP Komunalno Brčko, under licence from DERK. The legislation and the rules for electricity supply in RS, FBiH and BD foresee third party access to distribution grids and the competent regulators have approved and published distribution network tariffs for each corresponding jurisdiction.

Structure of supply sector

2.4.1 The Bosnian-Herzegovinian electricity supply market is currently in a transitional phase of opening up to competition. MP Elektroprivreda RS is tasked with supplying electricity for the territory of RS, while JP Elektroprivreda BiH and JP Elektroprivreda HZHB are tasked with supplying electricity for the territory of FBiH.

2.4.2 Currently, under the applicable laws and bylaws of FBiH, RS and BD, all purchasers of electricity, except for domestic households, may achieve the status of a qualified purchaser. Qualified purchasers have the right to freely choose their electricity suppliers and purchase electricity domestically or abroad under conditions agreed with the suppliers. However, in practice this regime is still not widespread nor adequately used.

2.4.3 The applicable provisions of the bylaws of RS, FBiH and BD respectively establish the basic switching conditions and procedures, and the respective rights and obligations of the purchasers and suppliers, as well as the rules for cases when a qualified purchaser fails to choose its supplier in or after the transitional period. The incumbent electricity companies have been designated as public (or reserve) suppliers, and have an obligation to supply electricity to qualified purchasers for a certain period of time in case of a change of supplier or supply problems. Until 1 January 2015, qualified purchasers may elect to be supplied under regulated prices at the same level as tariff customers. After 1 January 2015, households and small customers will also be able to freely select electricity suppliers, but can choose to remain supplied by the incumbent companies under regulated tariffs without time limitation.

2.4.4 In 2012, the only qualified purchaser in BiH was Aluminij d.d. Mostar, while all other electricity purchasers were supplied at regulated prices.

Structure of trading market

2.5.1 The wholesale market in BiH is operational, but is rather low in liquidity and is not yet sufficiently developed. It falls short of compliance with the Energy Community acquis in several aspects, supporting mainly bidding and over-the-counter (OTC) trading of volumes and services with no competitive balancing or spot-trading options. Existing laws do not contain sufficient details on terms and conditions for market opening. The main players on the wholesale market are the three incumbent electricity companies and active traders. The wholesale arrangements, including all exports and imports, take place among the incumbent companies or their subsidiary holders of generation and supply licenses, licensed traders and NOS BiH and Elektroprenos BiH.

2.5.2 Under the 2006 Rules on Third-Party Access to the Transmission System adopted by DERK, all licensed producers, distributors, suppliers and traders, as well as electricity purchasers, have the right to access the transmission system on equal terms. Although qualified purchasers may obtain electricity supply freely on the market, there are currently no independent electricity producers in BiH (other than the three incumbent electricity companies). Privately owned electricity generating stations generally sell their produced electricity to the incumbent electricity companies.

2.5.3 Licences for trading electricity domestically are issued by the entity-level regulators, FERK and RERS, although a licence issued in one entity is recognised and applies to the entire territory of BiH. Licences for cross-border trade of electricity and for the territory of BD are issued by the DERK.

European Energy Exchange

2.5.4 BiH does not participate in the European Energy Exchange, and has no organised electricity trading market. The trading patterns encompass annual OTC agreements for base load and exchange of redundant capacity with neighbouring operators. Balance responsibility and settlement is non-market-based. There is also no market for ancillary services and related costs are regulated. No spot-trading instruments (such as day-ahead auction or other spot markets) or local power exchanges have been established. Energy for covering losses is not explicitly purchased on the market, but provided from own (regulated) production when applicable.

Data on traded volumes

Price differentials

Electricity prices for domestic consumers in 2013 (July-December)

(EUR/kWh, taxes included) 4 Eurostat, Electricity prices for domestic consumers - bi-annual prices appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do?dvsc=8(accessed 9 September 2014).

Electricity prices for industrial consumers in 2013 (July-December)

(EUR/kWh, taxes included) 5 Eurostat, Electricity prices for industrial consumers - bi-annual prices appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nrg_pc_205&lang=en(accessed 9 September 2014).

Cooperation with other exchanges

2.5.5 NOS BiH is responsible for the allocation of cross-border transmission capacities between the electric power systems of BiH and neighbouring countries. The transmission network of BiH is interconnected with the systems of Croatia, Serbia and Montenegro. Since 2010 cross-border capacity rights have been allocated through market-based platforms (explicit auctions) on a daily, monthly and annual basis for 50% of the capacity.

2.5.6 Management of interconnection capacity is addressed in the legal framework at a state level and is under the responsibility of NOS BiH and DERK. Congestion management principles are enforced in the Market Rules and the Grid Code. Yearly, monthly and daily explicit auctions are regularly performed on all borders, without netting or coordination with neighbouring operators. Marginal prices are applied in cases of congestion. Transfer of capacity rights is possible except in the daily auctions. The principle “use-it-or-lose-it” is applied with unused capacity made available for intraday allocations on a first-come, first-served basis. Participation in the auctions is only possible for the holders of international electricity trade licences issued by DERK.

3.1.1 The electricity sector in BiH is characterised by a complex administrative structure and relatively fragmented legislation. Although legislation at the state level formally defines the electricity market as a “single economic space”, in practice three structures operate in parallel and the sector is separately organised for each of the three distinct administrative units – FBiH, RS and BD – by the respective regulators (DERK, FERK and RERS), depending on their allocation of powers. However, the operation of the transmission system is administered at the state level by Elektroprenos and NOS BiH.

3.1.2 Energy matters are primarily in the competence of the entities (FBiH and RS) and BD. However, at the state level, the Parliamentary Assembly of BiH is responsible for adopting legislation which remains within the competency of the state. The Ministry of Foreign Trade and Economic Relations of BiH is responsible for other energy related tasks and duties falling within the jurisdiction of the state of BiH. The state level regulator, DERK, has jurisdiction over transmission of electricity, transmission system operation and international trade in electricity. Since 2010, DERK has also regulated the electricity sector of BD. At the head of DERK are three commission members, two from FBiH and one from RS. The commission members are proposed by the respective entity governments to the entity parliaments. The entity parliaments propose those commission members to the Council of Ministers of BiH, which submits the proposal to the Parliamentary Assembly of BiH for appointment. Decisions of DERK are considered as final administrative decisions, and can be appealed through an administrative lawsuit to the Court of BiH.

3.1.3 In respect of the entities (FBiH and RS), legislation is adopted by the Parliament of the Federation of BiH and the National Assembly of RS respectively. Other matters related to electricity are in the competence of the Ministry of Energy, Mining and Industry of FBiH and the Ministry of Industry, Energy and Mining of RS. The two entity regulators, FERK in FBiH and RERS in RS, are responsible for regulating the electricity sector within their respective entity. Decisions of FERK and RERS are final and can be appealed by an administrative lawsuit to the competent courts in the respective entity.

Ministry of Foreign Trade and Economic Relations of BiH

3.1.4 At the state level, the Ministry of Foreign Trade and Economic Relations of BiH is responsible for tasks and duties falling within the jurisdiction of the State of BiH, such as defining policies and basic principles, co-ordinating activities and consolidating entity plans with those of international institutions.

State Electricity Regulatory Commission (DERK)

3.1.5 At the state level and as referred to in section 3.1.2 above, DERK has jurisdiction over transmission of electricity, transmission system operation and international trade in electricity. Since 2010, DERK has also regulated the electricity sector of BD. DERK is responsible, inter alia, for: issuing licences for energy transmission; regulating NOS BiH; international electricity trade and international electricity trade for its own requirements; issuing all electricity related licences (production, distribution, supply, etc.) and regulating the electricity prices for tariff consumers for the territory of BD; regulating the tariffs of transmission services and NOS BiH services; approving market rules and grid codes; and terms and conditions for connection and access to the network.

Ministry of Energy, Mining and Industry of FBiH

3.1.6 At the entity level of FBiH and as referred to in section 3.1.3 above, the Ministry of Energy, Mining and Industry of FBiH is responsible for proposing legislative acts dealing with energy matters, implementing and monitoring the implementation of relevant legislative acts, ensuring the functioning of the energy market in FBiH, as well as other tasks related to the electricity and energy sectors within its jurisdiction (i.e. in the territory of FBiH).
Ministry of Industry, Energy and Mining of RS

3.1.7 At the entity level of RS and as referred to in section 3.1.3 above, the Ministry of Industry, Energy and Mining of RS is responsible for proposing legislative acts dealing with energy matters, implementing and monitoring the implementation of relevant legislative acts, ensuring the functioning of the energy market in RS, as well as other tasks related to the electricity and energy sectors in its jurisdiction (i.e. in the territory of RS).
Regulatory Commission for Electricity in FBiH (FERK)

3.1.8 In the territory of FBiH, FERK is responsible for setting the general conditions for electricity supply and distribution grid codes, defining customer switching conditions, developing tariff methodologies and establishing tariffs (including distribution network tariffs, regulated services and prices for electricity produced or supplied in the domain of public service obligations). It issues, monitors and revokes licences for electricity undertakings within its jurisdiction, such as licences for electricity generation, distribution, supply and the construction of electricity generation plants, etc.

Regulatory Commission for Energy of RS (RERS)

3.1.9 In the territory of RS, RERS is responsible for setting the general conditions for electricity supply and the distribution grid codes, defining customer switching conditions, developing tariff methodologies and establishing tariffs (including distribution network tariffs, regulated services and prices of electricity produced or supplied in the domain of public service obligations). It issues, monitors and revokes licences for electricity undertakings within its jurisdiction, such as licences for electricity generation, distribution, supply and construction of electricity generation plants, etc.

3.2.1 The electricity sector is heavily regulated on all levels (BiH, FBiH, RS and BD) and there are a large number of laws, bylaws and regulations from the relevant authorities that must be observed. However, the basic and most important laws and regulations are:

BiH Level

• Law on Transmission of Electric Power, Regulator and System Operator of BiH;
• law establishing the Company for the Transmission of Electric Power in BiH;
• law establishing an Independent System Operator for the Transmission System of BiH;
• licensing rules of DERK;
• connection rules of DERK;
• grid code of NOS BiH; and
• market rules of NOS BiH.

FBiH Level

• Law on Electricity of FBiH;
• the law on the use of renewable energy and efficient cogeneration of FbiH; and
• rulebook on licencing of FBiH.

RS Level

• Law on Electricity of RS;
• the law on the use of renewable energy and efficient cogeneration of RS;
• regulation on incentives for generation of electricity from renewable sources and co-generation of RS; and
• rulebook on licensing of RERS.

BD Level

• Law on Electricity of BD.

Licences and tariffs

3.3.1 The principal means for regulating the electricity sector is through a licensing regime. Electricity related licences in BiH are issued by DERK, FERK or RERS, depending on the jurisdiction.

DERK

3.3.2 DERK is responsible for issuing licences in its competence. The licences issued by DERK are valid for a defined period, no shorter than five years and no longer than 40 years. In issuing licences, DERK’s rules on licences provide general non-binding terms for different types of licences (respective periods are indicated in brackets below). DERK is responsible for issuing the following licences:

• licence for transmission of electricity (25 years);
• licence for the activity of the Independent System Operator (seven years);
• international trading licence (five years);
• international electricity trading license for self-consumption (five years);
• BD licence for trade and supply with electricity in the territory of BiH (five years);
• BD licence for supply of non-eligible customers with electricity (five years);
• BD electricity distribution licence (25 to 30 years);
• BD electricity generation licence for facilities with installed capacity exceeding 1MW (25 to 30 years); and
• BD permit for construction of power facilities with installed capacity exceeding 1MW (six years).

3.3.3 DERK is responsible for regulating tariffs for the services of Elektroprenos BiH, tariffs for the operation of the Independent System Operator (NSO BiH), tariffs for ancillary services, tariffs for non-qualified customers belonging to the category of households in BD, tariffs for electricity distribution services in BD and also for determining the electricity costs of the default supplier in BD.

FERK

3.3.4 FERK is responsible for issuing licences in its competence. The licences issued by FERK are valid for a defined period, as provided in the rules on licensing (such periods indicated in brackets below). FERK is responsible for issuing the following licences:

• licence for power generation (up to 30 years);
• licence for power distribution (up to 50 years);
• licence for power supply (up to five years). Two types of power supply licences exist:
  • i. “Tier 1 Supply Licence” for distributors who supply electricity to customers in a regulated manner at regulated prices and who have a separate trade activity; or
  • ii. “Tier 2 Supply Licence” for any legal person engaged in supply other than the distributor required to obtain a Tier 1 Supply Licence; and
• initial licence for the construction or reconstruction of facilities and plants that will be used for electricity generation or distribution, with the exception of construction of any facilities or plants for plant or facilities’ own needs (such term defined by investment-technical documents of an applicant).

3.3.5 FERK is responsible for regulating tariffs for the supply of electricity to non-eligible (tariff) customers and tariffs for distribution system users.

RERS (Regulatory Commission for Energy of RS)

3.3.6 RERS is responsible for issuing licences in its competence. The licences issued by RERS are valid for a defined period, as provided in the rules on licensing (such periods in brackets in the list below). RERS is responsible for issuing the following licences:

• licence for generation of electricity in hydro generating stations, thermal generating stations, thermal generating stations with integrated mines and other facilities with a capacity of over 1mw (up to 30 years);
• licence for distribution of electricity by transfer of electricity at middle voltage and low voltage network for the purposes of delivery of electricity to customers (up to 30 years);
• licence for supply of tariff customers with electricity (up to five years);
• licence for trade and supply of electricity in the territory of BiH (up to five years); and
• licence for construction of an electric power facility with a capacity of more than 1mw (up to six years).

3.3.7 RERS is responsible for regulating tariffs for the supply of electricity to non-eligible (tariff) customers and tariffs for distribution system users.

Permits and Consents

3.3.8 Prior to commencing the construction of an electricity generating station, an operator must first obtain a planning permit as well as a construction permit from the local authorities. In FBiH and RS, this is generally in the competence of the cantons or municipalities, depending on the specific circumstances. If an environmental permit is necessary for the construction of such a generating station, an environmental permit, following the performance of an environmental impact assessment study, must be obtained prior to obtaining planning and construction permits. In FBiH and RS, an environmental permit, issued by the Ministry of Environment and Tourism of FBiH or the Ministry of Spatial Planning, Civil Engineering and Ecology of RS respectively, is necessary for the construction of coal powered generating stations with thermal output power of 50MW or more, for hydroelectric generating stations with an output power of 5MW or more for individual generating stations, or 2MW for several generating stations in an area smaller than 2km, as well as above-ground power lines with a voltage of 110 and 220kV. An environmental permit is also necessary for wind farms with an output power of 2MW or greater or which have more than four converters, as well as hydroelectric generating stations with an output power over 1MW. For these generating stations the requirement for an environmental impact assessment study is provided on case by case basis. In FBiH, facilities not covered by these provisions may be subject to other cantonal requirements.

3.3.9 According to the Law on the Policy of Direct Foreign Investment in BiH and the Law on Foreign Investments in BiH, foreign investors are considered equal to domestic nationals regarding the rules and conditions for establishing a company in BiH and regarding ownership of real property. In cases of privatisation of domestic companies, restrictions may be placed on the investor for a certain period, as agreed in the privatisation agreement (for example, an obligation to keep the same number of employees for a certain period, a restriction from disposing with shares for a certain period, etc.).

Renewables

3.4.1 BiH’s renewable energy potential is estimated at 6.8GW in small and large hydroelectric generating stations, 2GW wind, 33MW solar and 18TWh per year from biomass. According to estimates, BiH’s geothermal potential is the second largest in the Energy Community, at about 40GWh per year. 6 Energy Community Secretariat, Annual Report on the Implementation of the Acquis under the Treaty Establishing the Energy Community, page 158 (accessed 8 September 2014).

3.4.2 In FBiH, electricity from renewable energy sources was previously regulated by a 2010 Government Regulation on the Use of Renewable Energy Sources and Co-Generation. However, this regulation was nullified by the Constitutional Court of FBiH in early 2013. New legislation was adopted at the end of 2013. Under this system, the incumbent electricity companies have an obligation to purchase electricity by concluding twelve year contract with new renewable energy generators for the purchase of electricity at a guaranteed price based on a reference price and a determined coefficient. The highest coefficient was for solar generating stations and the lowest for hydroelectric plants. After the twelve-year contract has expired, generators of electric energy from renewable sources lose only the right to a guaranteed price.

3.4.3 In RS, this area is regulated by a 2011 Government Regulation on Generation and Consumption of Energy from Renewable Energy Sources and the Law on the use of renewable energy and efficient cogeneration from 2013. It also provides that generators of electricity from renewable energy sources can achieve one or more incentives for a period of 15 years, such as, inter alia, the right of mandatory purchase of the electricity generated under a guaranteed price by the incumbent electricity company, determined based on a reference price and an additional premium. The amount of electricity eligible to receive incentives is limited, with a yearly amount prescribed each year until 2020. A new law on Renewable Energy Sources and Efficient Co-Generation is currently in parliamentary procedure.

3.4.4 In BD, this area is not regulated in detail.

Emissions Allowances

3.4.5 BiH does not have an emissions allowances system as it is not a part of the EU Emissions Trading System. As a member of the Energy Community, however, it has an obligation to implement Directive 2001/80/EC by 31 December 2017.

3.5.1 A new law on electricity in FBiH, a law on the use of renewable energy sources and co-generation in FBiH and a law on renewable energy sources and efficient co-generation of RS were adopted in 2013. Amendments to the law on establishing the company for the transmission of electric power in BiH and a law on the electric energy in RS were also adopted in 2013.

• Parliamentary Assembly of BiH: www.parlament.ba
• Council of Ministers of BiH: www.vijeceministara.gov.ba
• Ministry of foreign trade and economic relationships of BiH: www.vijeceministara.gov.ba/ministarstva/vanjska_trgovina_i_ekonomski_odnosi
• Government of the Federation of BiH: www.fbihvlada.gov.ba
• Ministry of Energy, Mining and Industry of the Federation of BiH: www.fmeri.gov.ba
• Ministry of Environment and Tourism of the Federation of BiH: www.fmoit.gov.ba
• National Assembly of Republika Srpska: www.narodnaskupstinars.net
• Government of Republika Srpska: www.vladars.net
• Ministry of Industry, energy and mining of Republika Srpska: www.vladars.net/sr-SP-Cyrl/Vlada/Ministarstva/mper
• Ministry of Spatial planning, civil engineering and ecology of Republika Srpska: www.vladars.net/sr-SP-Cyrl/Vlada/Ministarstva/mgr
• Assembly of Brčko District: www.skupstinabd.ba
• Government of Brčko District: www.bdcentral.net
• DERK – State Electricity Regulatory Commission: www.derk.ba
• RERS – Regulatory Commission for Energy of Republic of Srpska: www.reers.ba
• NOS BiH – Independent System Operator in BiH: www.nosbih.ba
• JP Elektroprivreda BiH: www.elektroprivreda.ba
• JP Elektroprivreda HZHB: www.ephzhb.ba
• MP Elektroprivreda RS: www.ers.ba
• Energy Community: www.energy-community.org

Note

This Overview is partially based on the Annual Report on the implementation of the acquis under the Treaty establishing the Energy Community dated 1 September 2012, prepared by the Secretariat of the Energy Community.