NewsMontenegro's Regulatory Agency for Energy orders CGES to refund €34.7 million to...

Montenegro’s Regulatory Agency for Energy orders CGES to refund €34.7 million to consumers

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The Regulatory Agency for Energy has determined that the Montenegrin Transmission System (CGES) needs to refund consumers €34.7 million due to excess revenues generated from the allocation of cross-border capacities (primarily the cable to Italy) in previous years. However, only about €9.5 million will be refunded next year through a reduction in consumer bills, while the remaining amount will be returned in subsequent years.

This was noted in the report on the correction of CGES’s regulatory allowed revenue, which recently concluded a public discussion. The regulator has previously decided to increase the regulatory allowed revenue for the Montenegrin Distribution System (CEDIS) by approximately €13.5 million starting next year, which is more than the reduction for CGES. As a result, a slight increase in overall electricity prices is expected from January, even if the Electricity Company of Montenegro (EPCG) does not raise its billing rate. EPCG has not significantly changed its rates for 15 years.

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The Agency is expected to finalize its decision on the regulatory allowed revenues for energy companies by the end of November, detailing how much of the increases and decreases will affect different consumer groups and their ultimate impact on electricity prices.

EPCG has the right to increase its share of the billing rate—active energy—whenever market disturbances occur and its costs rise, without requiring the Agency’s approval. The company has stated that it is still analyzing whether to increase its billing rate. Next year, the Pljevlja Thermal Power Plant will not operate for eight months due to ongoing renovations, meaning Montenegro will need to import a significant amount of electricity during that time, with market prices being up to three times higher than what EPCG charges consumers.

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In its report, the Agency indicates that the CGES component in consumer bills for those with dual-rate meters should be reduced by 5.59%, and justified losses on the transmission network should be reduced by 1.7%. Both reductions would lower the final price by less than 2%.

During the public discussion, Momir Škopelja, a former member of the Agency’s board, submitted objections to this plan for returning CGES’s prepaid funds. He stated that the Agency’s formulation made it unclear who determined the regulatory allowed revenue in the past and how the error of €34.8 million occurred, asserting that it was not the Agency itself.

Škopelja emphasized that when the previous decision regarding CGES’s regulatory allowed revenue was made, clear indicators showed that revenues from the allocation of cross-border capacities would significantly exceed the Agency’s estimates. At the time of the pricing decision for 2023 (November 2022), CGES’s revenues from the allocation of transmission capacities amounted to around €32-35 million, while the Agency had projected these revenues for the entire year at only €23.9 million.

He argued that the statement claiming that “the established corrections are primarily the result of deviations in revenue from cross-border capacity allocations” attempts to shift responsibility away from the Agency.

The Agency noted in its report that returning the entire surplus revenue to consumers in one go would negatively impact CGES’s operations in 2025. Škopelja disagreed with this assessment, highlighting that CGES reported a net profit of €35.7 million last year and distributed a dividend of €10 million, with total undistributed profits amounting to €80 million.

He argued that the company could refund the entire amount in one year, which would only reduce its undistributed profits to €45 million, without adversely affecting the energy company’s operations as outlined in Article 11, Paragraph 2 of the correction rules justifying multi-year redistribution of refunds.

Škopelja believes that €25.3 million could be refunded to consumers next year and that it would be detrimental for consumers to wait several years for their refunds.

He added that this is especially pressing in a period of high inflation (particularly in 2023), as any delay in returning the full amount of compensation harms consumers. Furthermore, it is highly likely that the compensation amounts for 2024 and 2025 will also reach significant totals, leading to unnecessary accumulation of redistributed amounts in subsequent years.

Thus, he argues that it is reasonable to limit the compensation amount for 2025 based on the 2023 corrections to the level that does not lead to a negative regulatory allowed revenue for CGES for 2025, which is set at €25,385,258.37 according to the decision. In other words, he believes that of the total corrections for 2023 amounting to €34,787,557, €25,385,258 should be compensated in 2025, with only the remaining €9,402,299 carried over to future years.

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