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Anticipated decrease in electricity prices for Serbian economy sparks economic optimism

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Recent announcements from EPS‘s acting general director, Dušan Živković, have brought relief to businesses across Serbia, as he confirmed that household electricity rates will remain stable, while those for the economy are set to decrease starting May. Minister of Mining and Energy Dubravka Đedović Handanović echoed these sentiments, assuring the public that there’s no justification for a price hike.

Discussions with the International Monetary Fund (IMF) in November 2023 reinforced this stance, emphasizing that there’s no immediate need to adjust electricity and gas tariffs. The Ministry of Mining and Energy reiterated that the current rate for commercial customers, standing at around 120 euros per megawatt-hour, is expected to decrease. Analysts believe that this reduction is not only warranted but also essential for sustaining economic growth.

Following the conclusion of talks with the IMF regarding Serbia’s standby arrangement, Živković revealed plans to implement a new pricing methodology for commercial customers, commencing May 1st. This initiative aims to provide businesses with a secure and predictable energy supply, fostering an environment conducive to long-term planning and operational stability.

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Economist Mihailo Gajić attributes the potential reduction in electricity prices for businesses to increased production capacity within Elektroprivreda Serbia and slightly lower consumption due to milder weather conditions. Energy expert Miloš Zdravković concurs, highlighting the significant impact of energy costs on the economy and emphasizing the need for a political decision to address this issue.

However, determining the economically justified price remains a subject of debate. Aleksandar Milošević of the New Economy advocates for aligning electricity prices for businesses with market trends, pointing out the substantial disparity between current rates and exchange prices. On the other hand, Dušan Stojaković, an editor at “Večernji novosti,” cautions against external interference in Serbia’s energy pricing policies, emphasizing the importance of domestic control over these decisions.

Slobodan Ružić, an advisor at ENS Group, suggests recalculating the economically justified price of electricity in Serbia based on operational, capital, and development costs. This approach, he argues, would strike a balance between the current rate for businesses and the lower household tariff, ensuring fair pricing reflective of local conditions.

As Serbia navigates its energy pricing landscape, the impending reduction in electricity rates for businesses heralds positive economic prospects, promising greater affordability and competitiveness in the market.

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