State of Power Sector and Prospect of Reforms

Reflections on  a needs of a new Albanian energy market model

Published: Dr Lorenc Gordani,  October 01, 2014

Overview on Albanian Power Sector

The wholesale market in Albania is monopolized by the state-owned generation company Korporata Elektroenergjitike Shqiptare (KESH). It operates the three state-owned large hydro generation plants and the (non-functional) thermal power plant (TPP) Vlora. KESH also functions as a “wholesale public supplier” under the Power Sector Law and is appoint as supplier of last resort. The retail market is dominated by Operatori i Shperndarjes se Energjise Elektrike (OSHEE), former CEZ Shperndarje, acting as distribution system operator and public retail supplier. OSHEE supplies electricity to all categories of customers under regulated prices. The state-owned company Operatori i Sistemit te Transmetimit (OST) operates the transmission system of Albania and performs central dispatching and administration of the electricity flows.

The electricity system of Albania is interconnected with the neighbouring systems of Greece (400 kV), Montenegro (400 and 220 kV), and Kosovo* (220 kV). A new 400 kV interconnection with Kosovo is currently being built and should be operational early 2016. The Supervisory Control and Data Acquisition (SCADA) system installed in 2013 is expected to be applied on the entire network soon. After several years of testing, in April 2014 ENTSO-E decided for permanent synchronous operation of the Albanian electricity transmission system with the continental European system. This will allow OST to sign a long-term agreement and to be represented in ENTSO-E as a member.

Upcoming new Power Sector Law

In legal terms, the Power Sector Law of 2003 is still applicable. Based on a draft provided by the Secretariat, the Ministry in charge of energy currently discusses a new law supposed to transpose the Third Energy Package. Settling the dispute with CEZ cleared away the biggest obstacle to reform in the Albanian electricity sector. However, the largely non-compliant legal framework, the unsustainable volumes of unpaid electricity as well as the critical financial situation of the power companies remain problems of serious concern.

Anymore, bringing the Power Sector Law in line with the acquis, including the Third Package, needs to be achieved urgently. This needs to go hand-in-hand with the design of a new market structure. Among other things, this design must allow for spot-trading (i.e. day-ahead and intra-day markets) and market-based balancing structures. The generation price needs to be deregulated.

Furthermore, OST and OSHEE must be given the possibility to pass on the costs of their losses in an adequate and cost-reflective manner. The steps already taken by the task force, established in order to reduce losses and improve collection rates, need to be monitored and supported by the Ministry and ERE through consistent enforcement including penalties for non-cooperation or pre-paid metering as well as through reprogramming of debts, improved public relations and tariff reviews, as applicable. The restructuring of OSHEE in line with the unbundling requirements is another important step.

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