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Navigating Serbia’s electricity pricing puzzle: Balancing business needs and political realities

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Zoran Drakulić, president of the Serbian Business Club Privrednik, expresses concerns about the soaring prices of electricity in Serbia, highlighting that a megawatt now costs nearly 150 euros. Even a reduced price of 90 euros, he argues, remains unaffordable for most businessmen and threatens the closure of some factories. However, there’s skepticism that the offer from the Electric Power Industry of Serbia (EPS) will satisfy Drakulić and others, especially since energy experts don’t anticipate a significant drop in prices—unless it’s deemed politically advantageous ahead of local elections.

Despite the impending reduction in electricity prices for businesses from May 1, until then, they’ll continue to pay EPS significantly higher rates than those offered by other suppliers. On a positive note, there won’t be a repeat of last year’s Labor Day price hike, thanks to an agreement between the Serbian government and the IMF. Minister of Mining and Energy Dubravka Đedović Handanović and Acting General Director of EPS Dušan Živković have confirmed this development.

Đedović Handanović outlines that the current market trend suggests a potential correction in electricity prices due to decreased spot prices compared to 2022. With the new pricing methodology, both EPS and customers will have more stability in monitoring market fluctuations. However, Drakulić believes that even at 90 euros, the price remains exorbitant, considering the European market’s rates of 70 to 80 euros per megawatt.

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The decision to reduce electricity prices is seen as a balancing act between supporting the economy and maintaining energy sector stability. Nonetheless, there are doubts about the political motives behind the price reduction, particularly with upcoming local elections. Drakulić alleges preferential treatment for large consumers like Chinese companies Ziđin and Hbis, who supposedly enjoy lower rates than domestic businesses.

Energy expert Miloš Zdravković underscores the need for a comprehensive analysis before reducing prices to ensure the long-term viability of EPS and the energy sector. He points out that while EPS reported record profits in 2023, it was largely due to favorable conditions inherited from the previous leadership. Zdravković warns against hastily lowering prices without considering future market uncertainties and the implications for citizens and the economy.

The political implications of electricity pricing are evident, especially given the upcoming elections. However, amidst the debate, the broader concerns about Serbia’s energy security and affordability for consumers remain critical. As decisions are made, it’s essential to prioritize the country’s long-term energy sustainability while addressing immediate economic challenges.

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