World Bank’s loan to support electricity supply tariff rises in Serbia

World Bank (WB) EUR 160.6 million loan provided to Serbia will, among other activities, support public power utility Elektroprivreda Srbije (EPS ) in achieving increased convergence of the guaranteed electricity supply tariff to reach market parity levels.

The percentage and the date of the electricity price hike are not determined.

According to World Bank’s statement three loans approved by the WB’s Board of Executive Directors in the amount of EUR 225.7 million will help Serbian Government’s efforts to improve its management of public expenditures, to make energy and transport public utilities more efficient and financially sustainable, and to advance the health care of its citizens.

The Second Public Expenditure and Public Utilities Development Policy Loan (PEPU DPL 2), in the amount of EUR 160.6 million, supports the Government of Serbia’s multi-year effort to raise the efficiency and effectiveness of public spending as well as the transformation of the energy and transport sectors.

“PEPU DPL 2 will support EPS in achieving increased convergence of the guaranteed electricity supply tariff to reach market parity levels from 64 percent at end-2014 to 80 percent at end-2018, conditional on the analysis of the financial position of the company and the adequacy of resources for needed investments”, the WB said in a statement.

In its Program Information Document on the Second Public Expenditure and Public Utilities Development Policy Loan, World Bank said that electricity tariff raises will improve energy efficiency.

“By supporting the electricity tariff rises, which help correct distorted price signals, the operation is likely to generate environmental benefits through improved energy efficiency. Energy and carbon intensity in Serbia are high compared to the other Southeast Europe countries, given the large share of fossil fuel (particularly lignite) in their mix. Gradually adjusting the electricity prices for households and small and medium enterprises will create incentives to move toward the more efficient use of electricity, including discouraging use of electricity for heating purposes, and hence provide potential climate change mitigation co-benefits,” Program Information Document reads.

Among the goals of the PEPU DPL 2 is also to increase the number of total beneficiaries of the Energy Vulnerable Program, from 60,600 households in 2014 to 70,000 households in 2018 (of which 30 percent are female headed households). The loan will also back EPS’s efforts to optimize its labor force targeting an increase in the education level of EPS workforce.

Loan will also support Srbijagas and Railways Companies activities.