First energy license in Serbia for management of Closed Distribution System

Author: Attorney-at-law Vojinović B. Milan, Law Firm “VUK Tax Attorneys”

Date: 23th March 2018.

“Closed Distribution System” (“CDS”) concept was introduced into regulatory framework of the Republic of Serbia through valid Energy Law that came into force on 30th December 2014. EU legislation recognizes CDS concept as of 2009, when Directive 2009/72/EC of the European Parliament and the Council dated 13th July 2009 on Common Rules for Internal Power Market was enacted, allowing possibility for member states to introduce CDS concept into national laws for their power markets. CDS’ definition from Serbian Energy Law is fairly aligned with said EU Directive.

The first, and for now the only holder of license for distribution and management of CDS in the Republic of Serbia is Joint Stock Company “Airport Nikola Tesla” Belgrade, which obtained status of CDS’ operator on the basis of said license issued by the Energy Agency of the Republic of Serbia (the “Energy Agency”) at the end of 2017. After that, the Serbian Government concluded the Contract for Concession of the Airport “Nikola Tesla” in Belgrade, with the French company “Vinci Airports” in March 2018.

The Energy Law defines CDS as the system through which power is distributed in geographically limited industrial zone, trade zone or zone of common services, if: 1) business operations or production processes of system users are connected for specific and safety reasons; 2) power is primarily distributed to system owner or system operator, their related companies and other system users.

Besides this general definition of CDS, the Energy Law defines rights and obligations of CDS’ operator and provides it with significant autonomy to control and manage CDS within certain industrial or commercial area. However, obtaining status of CDS’ operator requires that business entity, as well as zone which is under its control, fulfil certain proprietary and technical conditions, as well as financial and capacities concerning personnel. Primarily, system must have certain independence and functional interconnectivity in order to be considered as CDS, which is finally determined by the Energy Agency within complex proceedings for issuance of license for power distribution and management of CDS.

CDS concept is important for the Serbian power market, mostly because of existence of certain number of industrial and commercial zones with common electro-energetic infrastructure, which is operated by one business entity who controls distribution of power consumed not only by that entity, but also by other business entities, i.e. users of the same zone. Therefore, business entities that are owners of particular industrial or commercial zone and accompanying infrastructure, and factually manage that zone and its infrastructure, have the opportunity, in accordance with the Energy Law and relevant by-laws, to submit to the Energy Agency request for obtaining license for power distribution and management of CDS, in order to independently control electro-energetic infrastructure and its maintenance, as well as distribution, i.e. supplying and consumption of power within particular zone in their ownership, if they possess aforesaid capacities.