2012 on 7th of June 2013 ANNUAL REPORT 2012 FOREWORD Dear all, You have in front of you the Energy Regulatory Office’s Annual Report 2012, structured in line with Article 9 of the Law on Energy Regulator, for submission to the Assembly of the Republic of Kosovo for information, review and approval. The report presents an overview of activities that were carried out as well as main achievements of ERO and energy sector during the calendar year 2012. The report contains information on the most important events on the energy market, the energy tariffs review, the financial report of ERO, as well as data on regulated activities in the energy sector of the Republic of Kosovo. During 2012 have been harmonized all existing licenses for energy activities based on harmonization of the ERO secondary legislation. The whole process has been developed in consultation with third parties and the public. The harmonized and finalized licenses have been approved by the Board of ERO in public hearings. The insufficiency of the existing generation capacities to meet the supply demands and the need for investments in the energy sector in Kosovo requires initiation of energy sector restructuring through liberalization of the market and growth of competition in the market of electricity. In order to achieve these objectives, the development of Market Design is in the process of finalization, expected to be approved by the ERO very soon. The Government of Kosovo is in the process of finalizing the privatization of distribution and supply, which are presently within KEK. New investor, based on the tendering package is expected to undertake the responsibility on distribution and supply in the beginning of May 2013. Important investments have been done in the transmission system that resulted in decreased bottlenecks, improved quality of supply and decrease of technical losses in transmission. Due to insufficient investment, the situation of distribution network remains poor, with high technical and commercial energy losses and inability to ensure quality electricity supply to the customers. The electricity produced by national generators has not been sufficient to meet the consumption demand. The shortage is imported from the regional market at relatively high prices. ERO, also during 2012, continued with the process of monitoring licensees and supervising implementation of applicable laws and rules, in order to enhance the quality of supply and customer service. The 2011/2012 season in the district heating sector was generally characterized by a disrupted supply, with frequent interruptions lasting to several days and finally with a termination of heating supply for nearly two months before the end of the heating season. ERO has actively participated in all activities and working groups of the Energy Community Treaty of Southeast Europe (ECSEE), as well as of the Energy Community Regulatory Board (ECRB). Respectfully, Enver Halimi Chairman of the Board of ERO 1 ANNUAL REPORT 2012 TABLE OF CONTENT FOREWORD ..................................................................................................................................... 1 1 ABOUT THE ENERGY REGULATORY OFFICE .................................................................................. 6 1.1 Mandate of the Energy Regulatory Office .................................................................................. 6 1.2 Organisational Structure of ERO ................................................................................................ 6 1.2.1 Board ............................................................................................................................................. 6 1.2.2 Legal and Licensing Department ..................................................................................................... 7 1.2.3 Energy Market Department ............................................................................................................ 7 1.2.4 Tariffs and Pricing Department ....................................................................................................... 7 1.2.5 Customer Protection Department .................................................................................................. 7 1.2.6 Thermal Energy and Natural Gas Department ............................................................................... 7 1.2.7 Administration Unit ........................................................................................................................ 8 1.3 ERO Staffing Needs ..................................................................................................................... 8 1.4 ERO Capacity Building – Technical Assistance Projects and Professional Trainings ................... 8 1.5 Technical Assistance Projects ..................................................................................................... 9 1.6 Trainings and Workshops ........................................................................................................... 9 2 FINANCIAL REPORT ................................................................................................................... 11 2.1 Revenues .................................................................................................................................. 11 2.2 Budget ...................................................................................................................................... 12 2.2.1 Budgetary Expenses ...................................................................................................................... 12 3 LICENSING AND AUTHORIZATION FOR CONSTRUCTION OF NEW CAPACITIES ............................ 16 3.1 Licenses .................................................................................................................................... 16 3.1.1 Extension of Licenses .................................................................................................................... 16 3.1.2 Modification of Licenses ............................................................................................................... 17 3.1.3 Monitoring of Energy Enterprises ................................................................................................. 18 3.2 Construction of New Generation Capacities ............................................................................ 20 3.2.1 Issuance of Preliminary Authorisation .......................................................................................... 20 3.2.2 Issuance of Final Authorisation..................................................................................................... 20 3.2.3 Termination of Preliminary Authorisation .................................................................................... 21 3.2.4 Aplication under review by ERO ................................................................................................... 21 3.3 Documents and Decisions Approved by the Board of ERO ...................................................... 22 4 ELECTRICITY SECTOR ................................................................................................................. 23 4.1 Transmission Network .............................................................................................................. 24 4.2 Distribution Network ................................................................................................................ 27 4.3 Production ................................................................................................................................ 28 4.3.1 Production and Consumption of Lignite ....................................................................................... 28 4.3.2 Generation of Electricity ............................................................................................................... 28 4.4 Electricity Flow and Overall Consumption ............................................................................... 32 4.5 Load in the Kosovo Power System ........................................................................................... 33 4.6 Overall Electricity Consumption and Losses in Transmission ................................................... 35 4.7 Consumption in Distribution Level ........................................................................................... 37 4.8 Distribution Losses ................................................................................................................... 38 4.9 Billing and Collection ................................................................................................................ 39 4.10 Electricity Market ..................................................................................................................... 41 4.10.1 Exchange and Flow of Electricity .................................................................................................. 41 2 ANNUAL REPORT 2012 4.10.2 Import and Export of Electricity .................................................................................................... 42 4.11 Electricity Supply and Service Quality Standards ..................................................................... 45 4.11.1 Continuity of Supply ..................................................................................................................... 45 4.11.2 Voltage Quality ............................................................................................................................