Legal Briefing

New energy legislation in Bosnia and Herzegovina

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Projects, energy and natural resources | 04 June 2011

The energy sector is one of the most important sectors in Bosnia and Herzegovina (BiH), boasting a long-standing, continuous development history and enormous potential and opportunities for further investment. This sector is currently subject to extensive reforms and a restructuring process, with the intention to turn it into an integral part of the European energy market. Before analysing some of the most recent changes in energy legislation, however, it is necessary to take a preliminary look at the BiH legal system in general.

The country of BiH consists of two separate entities: the Federation of Bosnia and Herzegovina (FBiH) and the Republic of Srpska (RS); and the District of Brcko (BD), an autonomous district under direct sovereignty of the state. Essentially, three different legal regimes apply and in certain cases, the relevant laws regulating a particular matter in the three jurisdictions show substantial differences, which, in principle, can be said for certain regulatory issues of the energy sector. In BiH the energy sector falls under the jurisdiction of both the state and the entities; on both an entity and on a state level the following regulatory commissions have been established:

  1. the State Electricity Regulatory Commission (State Regulatory Commission);
  2. the Regulatory Commission for Electricity in FBiH (FBiH Regulatory Commission); and
  3. the Regulatory Commission for Energy of RS (RS Regulatory Commission).

The main purpose of these regulatory commissions is to ensure adequate implementation of the relevant energy legislation, inter alia, by passing various bylaws providing for specific regulations. Recent changes to electricity legislation in FBiH and RS, dating from January 2011 up until the publication of this article, aim to regulate in more detail the procedures for obtaining specific licenses and/or certificates, as well as certain obligations of licence holders towards the competent regulatory commission.1 This article will therefore provide a general overview of the two significant rulebooks in FBiH and RS as the most vital aspects of the newly adopted legislation.

RULEBOOK ON NOTIFICATION FOR LICENCE HOLDERS FOR ACTIVITY OF SECOND ROW ELECTRICITY SUPPLY AND FOR INDEPENDENT PRODUCERS

The FBiH Regulatory Commission has adopted the Rulebook on Notification for Licence Holders for Activity of Second Row Electricity Supply and for Independent Producers (FBiH Rulebook), which entered into force on 12 April 2011. According the FBiH Rulebook, licence holders are obliged to submit periodic reports on issues that might influence their business activities. The FBiH Rulebook explicitly stipulates that the obligation for notification includes, inter alia, financial documentation of the licence holder and reports on significant changes, such as corporate or status changes of the licence holder. It should be noted that, in terms of the FBiH Rulebook, the term ‘licence holders’ refers to:

  1. Licence holder for activity of second row electricity supply: a legal entity that is involved in electricity supply, but does not have the status of a distributor of electricity.
  2. Independent producer: a producer who performs functions of transfer or distribution of electricity in the territory covered by the system under which the independent producer was founded.

The crucial reasons for the adoption of the FBiH Rulebook are:

  1. so that the FBiH Regulatory Commission can request from each licence holder the delivery/submission of relevant information necessary for the FBiH Regulatory Commission;
  2. to regulate the obligation of licence holders to deliver relevant information within prescribed deadlines and to co-operate with the FBiH Regulatory Commission in that respect;
  3. to determine precisely the manner and types of reports, information and other relevant documents to be submitted to the FBiH Regulatory Commission; and
  4. to determine the manners of collection and processing of data related to electricity prices.

The latter point is in accordance with the new methodology adopted by the EUROSTAT, which is based on the Commission Decision from 7 June 2007 (2207/394/EC), which refers to amendments of the Directive 90/377/EEC. Under the FBiH Rulebook, the FBiH Regulatory Commission will ensure the full protection of all received data, in accordance with the rules and regulations of the FBiH Law on Electricity.

In a very broad sense, the FBiH Rulebook aims to ensure transparent and equal relations between all participants of the relevant electricity market, thus enabling the establishment of an efficient and reliable system of production, distribution and electricity supply.

RULEBOOK ON ISSUANCE OF CERTIFICATES FOR PRODUCTION FACILITIES THAT PRODUCE ELECTRICITY BY USING RENEWABLE ENERGY SOURCES OR IN EFFECTIVE CO-GENERATION

The most significant changes have been made in the RS, where the RS Regulatory Commission passed the Rulebook on Issuance of Certificates for Production Facilities that Produce Electricity by Using Renewable Energy Sources or in Effective Co-generation (RS Rulebook), which entered into force on 23 March 2011. The main aim of this adoption is to ensure transparent and efficient procedures of issuance of previously mentioned certificates, based on those acquirement of rights on incentives (podsticaji) of production of electricity from renewable sources and efficient co-generation, that will be simplified, as well as the simplified issuance of certificates (guarantees) of electricity origin. In general, the RS Rulebook governs the content of the certificate, as well as the procedure and criteria for its issuance.

The certificate is defined as a document, which is issued to the producer of electricity for an individual production facility, confirming that such facility meets all necessary criteria and conditions for the simultaneous production of electricity and calorific energy (toplotna energija), or for the production of electricity by using waste or renewable energy sources in an economically appropriate way and in accordance with environmental regulations.

The certificates are issued for one of the following periods:

  1. 15 years for production facilities using wind and water energy;
  2. five years for production facilities using other renewable energy sources; and
  3. one year for efficient co-generative production facilities.

It should be noted that the RS Rulebook explicitly states that those co-generative production facilities that use renewable energy sources or a combination of renewable and non-renewable energy sources, can obtain only one certificate; either a certificate for a facility using renewable energy sources, or a certificate for an efficient co-generation facility.

Relevant aspects of the procedure

The procedure for issuing the certificate is initiated by the submission of the request for issuance of the certificate by the competent legal entity’s representative or its proxy. The request is submitted via an appropriate form, with enclosed copies of all necessary documents. The form needs to be signed and authorised (stamped), while the enclosed documentation needs to be submitted as either originals or verified copies.

On establishing the adequacy of the request, the RS Regulatory Commission notifies both the applicant and the public, after which it decides on the type and place of a public discussion regarding the received request. If the RS Regulatory Commission finds it appropriate and necessary, it can decide to hold more than one public discussion regarding the received request. If and when all relevant conditions have been met, the RS Regulatory Commission passes a final decision on the issuance of the certificate.

The request for the issuance of the certificate can be submitted together with the request for obtaining a licence for the production of electricity, with all relevant documents enclosed. If both requests and the documents are complete, the RS Regulatory Commission will consolidate both procedures.

Data register

The RS Regulatory Commission maintains a register of all issued certificates, in both hard copy and electronic format. All data in the register is public and can be accessed by third parties. As for the electronic data, this can be accessed electronically via the webpage of the RS Regulatory Commission (www.reers.ba). In addition, the RS Regulatory Commission also maintains a register of all received requests.

Transfer and extension of the Certificate: special procedures

On expiration of the certificate, its holder can submit a request for its extension. The request is submitted in a special form, at the latest one month before the expiration of the certificate, provided that no significant changes have occurred that influence the operation of the production facility in such a way that it becomes necessary to submit a request for the issuance of a new certificate.

If the holder of the certificate transfers the property of or other rights related to the production facility during the duration of the certificate, they can also transfer the certificate to the same third party. The request, in this case, is submitted, together with the necessary documentation and evidence of transfer of previously mentioned rights, to the entity to which the certificate is being transferred.

If the RS Regulatory Commission finds that the applicant gave false data during the process of obtaining, extending or transferring the certificate, it will annul such certificate and the applicant will not be able to obtain a new certificate within three years.

Supervision of activities and withdrawal of certificate

The RS Regulatory Commission performs a supervision of the production facility and its activities to ensure that all criteria on which the certificate has been issued are fulfilled. In that respect, a producer, who is the holder of a certificate, is required to enable any supervision and to co-operate with the personnel of the RS Regulatory Commission during such supervision. They are also required to submit a statement on the fulfillment of the conditions for the issuance of the certificate for the previous year, at the latest by the 31 January of the current year.

If, during the supervision, the RS Regulatory Commission finds that:

  1. the holder of the certificate, the production facility, does not fulfill one or more conditions based on which the certificate was issued;
  2. the holder of the certificate, the production facility, does not perform the activities of electricity production in the production facility in accordance with the relevant laws;
  3. the holder of the certificate is in the process of liquidation;
  4. the termination of a concession agreement for the production facility is imminent; or
  5. the holder of the certificate, the production facility, does not enable the representatives of the RS Regulatory Commission to perform the supervision of the facility and provide relevant documentation;

it will withdraw the certificate and the holder of the certificate will not be able to obtain a newcertificate within three years.

CONCLUSION

Electricity legislation in BiH is continuously changing to adapt to trends in the EU market. Both the development of the national electricity market and its involvement in the international electricity market can only be achieved by creating a modern and efficient legal framework that enables foreign investors to achieve their goals and ensures the protection of such investments in the BiH electricity market. The recently adopted legislation in both FBiH and RS represents a contribution to the creation of such a legal framework. It provides for transparent relations between the market participants (national and foreign), affirms positive competition and creates favorable economic conditions on the electricity market in BiH.

Note

  1. Law on amendments of the Law on Transfer, Regulator and Operator of Electricity System in Bosnia and Herzegovina (BiH); Rulebook on Issuance of Temporary Licenses for Activities of Electricity Supply and Distribution in District of Brcko (BD); Rulebook on Manner of Determination of Temporary Tariffs (Fees) for Non-qualified Electricity Buyers in BD; Decision on Temporary Tariffs for Non-qualified Electricity Buyers in BD; Decision on Prolongation of Application of Decision on Determination of Tariffs for Supplementary Services – adopted by State Regulatory Commission;
  2. Rulebook on Notification for License Holders for Activity of Second Row Electricity Supply and for Independent Producers – adopted by FBiH Regulatory Commission; and
  3. Rulebook on Issuance of Certificates for Production Facilities which Produce Electricity by Using Renewable Energy Sources or in Effective Co-generation; Decision on Regulatory Fee for 2011, number P-21-63-16/11, and Instruction for Calculation of Savings of Primary Electricity of Co-generative Facility – adopted by RS Regulatory Commission.