Framework for the Development of Action Plan for the Establishment of Organized Wholesale Electricity Market in Bosnia and Herzegovina

This initiative is a response to the recommendations from the Study on Wholesale Market Opening in SEE, developed under the auspices of the World Bank. The Energy Community Contracting Parties and Slovenia, Hungary, Greece, Bulgaria, and Romania are obligated to develop local Action plans for the establishment of organized wholesale electricity markets. The development of this framework involved the use of material prepared by the regulatory Subgroup for the development of the document related to the recommendations from the World Bank Study on opening of the wholesale market in SEE. This material was earlier submitted to all competent ministries. The table below provides an overview of activities that need to be implemented in BiH to establish an organized wholesale electricity market. Unbundling activities in the electricity sector are a key requirement, with full unbundling activities to be completed by the end of 2011. Removal of full supply contracts between generators and suppliers is also necessary, with drafting or modification of energy policies to enable replacement of full supply contracts with contracts based on base load that will be gradually reduced year by year and replaced by trading in the Day Ahead market. This is to be completed by the end of 2012. A transitional period for regulation of tariffs is also required, with the development of a procedure and schedule for transition from regulated to market prices. This is to be completed by September 2011. The balancing responsibility and balancing mechanism are also critical, with the description and improvement of processes for the provision of ancillary services and drafting or improvement of contracts on transmission network: ancillary services, balancing, third-party access contract, and connection to network. This is to be completed by the end of 2012. The creation of a local Day-Ahead Market (DAM) and joining the Regional Electricity Market is also a key requirement. Drafting or modification of energy policies to provide for the creation of a local DAM and joining to the Regional market is to be completed by September 2011. Development of legislation for the establishment of a Market Operator, local DAM, and authorization for joining the Regional Market is also required, to be completed by the end of 2011. Establishment and beginning of operation of the Market Operator is to be completed by June 1, 2012, while the beginning of functioning of the local DAM is to be completed by January 1, 2013. Joining the Regional DAM is to be completed by January 1, 2014. Allocation of cross-border capacity to the Regional DAM is also required, with authorization of the system operator to allocate a part of the cross-border transmission capacity for regional implicit auctions to be completed by mid-2013. Access of large customers to the DAM is also necessary, with enabling large eligible customers to actively participate on the DAM to be completed by the beginning of 2014. Covering of transmission losses is also required, with enabling that the energy for covering of transmission losses is bought on the DAM to be completed by the beginning of 2014. Transparency of market data is also critical, with ensuring that all necessary information on wholesale market is easily available to market participants to be completed by the end of 2012. Market monitoring is also a key requirement, with establishing an efficient system of market monitoring to be completed by the end of 2012. The responsibility for development of the BiH Action Plan for Establishment of Organized Wholesale Electricity Market lies with the Ministry of Foreign Trade and Economic Relations (MOFTER), and this material will be submitted to this Ministry to initiate and support the activities on development of the Action Plan. Other relevant institutions should be involved in this process as well.