Sunday, December 3

Serbia Plans Incentives for Households to Lower Electricity Use

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(Bloomberg) — Serbia plans to reward households who lower their electricity consumption with discounts on utility bills, a burden on public finances that’s still less than paying for expensive power imports, said President Aleksandar Vucic.

The Balkan nation’s dominant power producer, state-owned Elektroprivreda Srbije, or EPS, cannot meet the demand from own facilities. Serbia’s total power consumption is about 120 gigawatt hours per day in winter months, and about a sixth of that would need to be imported at a cost of up to 20 million euros ($20 million) a day, Vucic told reporters on Saturday as he outlined the proposal.

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Serbia’s government, controlled by Vucic’s party, is expected to adopt the measures soon in time for them to be implemented from October.

Serbia traditionally caps power prices for households at below-market rates and, even after a recent increase in the regulated segment, the state utility is losing money. EPS reported a net loss of 49.25 billion dinars ($421 million) for the first half of 2022 .

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While the planned discounts would cut EPS’s revenue, “the state will make it up because we’re losing enormous money on electricity imports,” Vucic said.

Under the proposal, discounts of 10% to 30% in utility bills would be offered to those who cut their monthly consumption by at least 5% from a year earlier, with the “reward” rising relative to the savings energy, the president said.

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The largest former Yugoslav republic announced in August that it aims to cut overall energy consumption by at least 15% while building up natural gas reserves at its sole storage in northern Serbia and a rented gas depot in neighboring Hungary. Serbia largely relies on Russia’s Gazprom for gas.

The storage at home, co-owned by a Gazprom unit, is “full to the brim” with 287 million cubic meters of gas at the Serbia’s disposal, Vucic said. Another 352 million cubic meters is stored in Hungary.

Soaring energy prices and the war in Ukraine risk a widening in Serbia’s balance of payment gap that may require tapping into foreign currency reserves, Vucic said. “Thanks to the good state of our public finances, we can endure that for two years, but what should we do if the war lasts for three or four years?” he said.