Introduction

The liberalisation of the gas market in Croatia started when Croatia joined the European Union and gradually began implementing the EU Third Energy Package. However, although the gas market appeared to be undergoing liberalisation, amendments made to the Gas Market Act in 2014 allowed the government to postpone full implementation by decision and nominate one entity, state-owned HEP dd, as the only wholesale market supplier to buy gas at regulated prices from the national producer and sell it to public service suppliers at regulated prices for an additional three years. The three-year transition period ended on March 31 2017.

Consequently, in February 2017 Parliament passed the Act on Amendments to the Gas Market Act (Official Gazette 16/17), according to which state-owned HEP dd will no longer have a monopoly as the only gas supplier. According to the 2017 amendments, the government will use a public tender procedure to choose one wholesale supplier which will, under regulated conditions, sell gas to retail suppliers. However, until such tender is announced, HEP dd will continue to be the only supplier of suppliers.

New gas market model

The goal of the amendments is to protect consumers from excessive gas market prices and thus they set out a new gas market model. Under the new gas model, on receiving a proposal from the ministry and following approval from the Croatian Gas Regulatory Agency (HERA), the government will set the maximum price for gas, according to which the wholesale supplier must sell gas to retail suppliers for households.

The government will continue to dictate the gas prices for households since it believes that there are no prerequisites in Croatia for the total liberalisation of the gas market (ie, deregulation of the gas prices for households due to the country's economic situation, an underdeveloped wholesale market, a lack of natural gas suppliers and a lack of technical requirements for switching gas supplier).

New methodology

Additionally, following the 2017 amendment to the Gas Market Act, HERA passed the new methodology for determining the amount of tariff items for public gas supply and guaranteed supply, which entered into force on April 1 2017. Although the methodology sets the maximum gas price, suppliers can set lower gas prices for their consumers. As expected, only one of 55 gas suppliers decided not to increase the gas price up to the maximum set by the methodology.

Critics say that the new tariffs come at a bad time, when market gas prices have gone up due to the long and cold winter, and that is more likely that the prices will increase rather than decrease.

Comment

In Croatia, the price for household gas is among the cheapest in the European Union due to regulated prices. For example, 100 kilowatts (kw) of gas in Croatia costs €4.30, while the average price in EU member states is 44% higher at €6.20 per 100kw. In comparison, Romanian households pay the lowest gas prices in the European Union (€3.30 per 100kw), while Swedish households pay the highest gas prices (€11.30 per 100kw).

On the other hand, the price of gas for industrial consumers in Croatia is above the EU average. While Croatian companies pay €3.30 per 100kw, the EU average is €3.20. Interestingly, many economically stronger countries such as the United Kingdom, Belgium and Italy have lower prices for industrial consumers than Croatia.

It remains to be seen how this new gas market model will affect consumers, the economy and the overall gas market in Croatia.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact Miran Macešic or Ivana Manovelo at Macešic & Partners by telephone (+385 51 215 010) or email (mmacesic@macesic.hr or manovelo@macesic.hr). The Macešic & Partners website can be accessed at www.macesic.hr.