In-depth | Energy

Unpaid bills and a mounting debt

By - 29.06.2022

Electricity and the north of Kosovo.

Since 1999, Kosovo Serbs living in the four Serb-majority municipalities in the north of Kosovo have not paid their electricity bills. The cost of the unpaid electricity has been borne for years by the rest of the country, creating mounting debts and major financial problems for Kosovo’s electricity companies.

“They are using more electricity than the rest of Kosovo,” said Kadri Kadriu, CEO of Kosovo’s electricity transmission and systems operator (KOSTT), which is responsible for covering the cost of the unpaid bills. “They do not care since they are not paying. We are supplying and not getting money.”

But after more than two decades, a solution appears on the horizon. On June 21, Kosovar Deputy Prime Minister Besnik Bislimi met with Petar Petković, director of the Serbian government’s Office for Kosovo and Metohija, to sign an agreement on implementing old energy agreements between the two countries from 2013 and 2015. The meeting was facilitated by Miroslav Lajčák, the EU special representative for the dialogue between Kosovo and Serbia.

“Very pleased to announce that Kosovo and Serbia just adopted the Energy Agreements’ Implementation Roadmap in the framework of the EU-facilitated Dialogue. This is a major step forward,” wrote Lajčák on Twitter, after the agreement was signed.

The agreement calls for a Serbian electricity distributor to operate in the four northern Serb-majority municipalities and to start enforcing the payment of electricity bills. Additionally, the agreement calls for KOSTT and the Kosovo electricity distribution company (KEDS) to be allowed access to distribution and transmission infrastructure in the north of Kosovo.

Though the 2013 and 2015 electricity agreements went unimplemented, politicians are saying they are serious about the implementation of the latest deal. Petković said that he will “personally be on the ground with our people and monitor the implementation of the agreement.” At the same time, the latest agreement has a clause that states that Kosovo can withdraw or suspend the Serbian company’s license to operate in the north after 100 days if there is not full compliance with the agreement.

In what appeared to be a reaction to the news, a hand grenade went off at an electric distribution facility in North Mitrovica on the night of June 23. The blast caused a brief power outage. At the same time there have been a series of small protests in the city since the announcement of the agreement against the purported lack of transparency in decisions that affect the north of Kosovo.

On June 24, Kosovo carried out its commitment and issued a license to Društvo Elektrosever DOO, a Serbian electric supplier, by unanimous decision of the Energy Regulatory Office (ERO). The company will now begin supplying and billing customers in the north on a five year license, with prices determined by Elektrosever. 

Up until 2017, electricity consumers throughout the rest of Kosovo had to cover the cost of the unpaid electricity in the north. On average, electricity bills were 3% higher across the rest of the country to make up for the losses. But in 2017 a court decision declared it illegal to force customers to cover the shortfall, and the responsibility for covering the costs fell to KOSTT. They’ve responded by going into debt and relying on periodic subsidies from the government to manage.

“The government of Kosovo has subsidized KOSTT 10 million euros in order to supply the northern part of Kosovo, and we have given an additional 32 million to that because the electricity price went up during the winter. And we have all this evidence in our records,” said Kadriu, speaking about the situation since 2017.

A recent report from the Prishtina-based policy think tank GAP Institute says that “these multimillion payments made over the years have had a large impact on the energy market in Kosovo,” and that it is putting a financial strain on KOSTT and the public budget.

In November 2021, KOSTT announced that they would cease providing free electricity to those residing in the north, but no action was taken.

“We have to solve this,” Kadriu said. “KOSTT is supplying the northern part of Kosovo with electricity. We are paying 100% for the electricity for the northern part of Kosovo today.”

With an apparent breakthrough on this now decades-old impasse, K2.0 breaks down the various sticking points, political controversies and financial headaches associated with 20-plus years of contention around electricity and the north of Kosovo.

The view from the north

The fact that most people living in the four Serb-majority municipalities in the north of Kosovo haven’t paid their electricity bills since 1999 frequently draws scorn from the rest of the country.

Milan Dobrić, a photographer who lives in North Mitrovica, said that Serbs living in the north of Kosovo are even criticized by people in Serbia. “Some of them think that we live in heaven because we don’t have to pay,” Dobrić said.

Dobrić noted that public employees in the Serbian parallel system in Kosovo sometimes receive salaries that are 30% to 50% more than equivalent jobs in Serbia. “That’s how [the Serbian government] wants to support people living here, to subsidize us basically,” said Dobrić.

"They didn’t necessarily demand free electricity, but it just sort of happened."

Caleb Waugh, NGO Aktiv

K2.0 interviewed a number of civil society representatives in North Mitrovica and most expressed frustration about how Kosovo Serbs have remained voiceless in an issue that affects them most. Caleb Waugh, an American who works as the head of practical policy for the North Mitrovica-based NGO Aktiv, and who has lived in North Mitrovica for almost a decade, said, “What is lost in all of this is the perspective of the average citizen, which is that they didn’t necessarily demand free electricity, but it just sort of happened.”

When reflecting on the unpaid electricity bills, some see Kosovo Serbs as something other than passive beneficiaries though. Slobodan Stošić, program manager at the Advocacy Center for Democratic Culture (ACDC), implied that the issue should be used by Kosovo Serbs to apply pressure on the government of Kosovo.

“I’m not sure that the north will agree to pay for electricity until some terms of the Brussels Agreement are fulfilled,” said Stošić. “I don’t think people in the north will accept paying for electricity unless they get something in return.”

He suggested that the electricity bills could be a way to demand the establishment of the Association of Serb Municipalities, which was called for in the 2013 Brussels Agreement signed by former prime ministers of Serbia and Kosovo, Ivica Dačić and Hashim Thaçi. The Association was meant to provide Kosovo Serbs with a large degree of autonomy. It has not been implemented because many in Kosovo see the Association as a threat to the country’s sovereignty and an imposition from the international community.

Aleksandar Arsenijević, a 29-year-old from North Mitrovica and the leader of the political initiative Srpski Opstanak (Serbian Survival) said, “Serbs have been criminalized for not paying electricity bills but we haven’t received any bills for the past 20 months.”

In 2020, after Kosovo left the Serbia-Montenegro-North Macedonia electricity regulatory bloc and joined a regulatory bloc with Albania, inhabitants of the four northern Serb-majority municipalities stopped receiving electricity bills completely.

For years, residents of the four Serb-majority municipalities received electricity bills but it was widely understood that there was no consequence for not paying them. 

The bills were sent by Serbia’s main electricity company Elektroprivreda (EPS). EPS’s website states that they also own three public enterprises in Kosovo but that, “As of June 1999, EPS has not been able to manage its capacities in Kosovo and Metohija.”

Electricity in the north of Kosovo has been a political sticking point for years.

One of these enterprises, Elektrokosmet, has continued to operate in Kosovo in some form. Founded in 1991, their company’s website says that their activities include “electricity distribution and maintenance of power facilities in northern Kosovo and Metohija” and “electricity production in small hydropower plants.”

Commenting on the situation in the weeks before the latest agreement was signed, Gani Buçaj, a board member of Kosovo’s Energy Regulatory Office (ERO), said “Elektroprivreda, Elektrokosmet, are operating illegally because they are not licensed by us.”

Arsenijević said that in North Mitrovica authorities do occasionally pressure business owners to pay their electricity bills. Arsenijević runs a cafe in the city and he said that he paid the electricity bill for his business to Elektrokosmet. But one summer they received abnormally high bills right before Serbian authorities went business to business threatening to disconnect the electricity to the whole street until all the businesses paid their bills.

“The truth is that also some of the citizens there, they do pay, also the electricity, but they pay to some illegal companies that operate in the north. These are mainly Serbian-registered companies, registered in Serbia that operate illegally in that part of Kosovo,” said Dardan Abazi, Senior Researcher at the Institute for Development Policy (INDEP), a Prishtina NGO.

K2.0 attempted to contact Serbia’s Office for Kosovo and Metohija, Petar Petković, Elektrokosmet and the Energy Agency for the Republic of Serbia, but all were unresponsive.

A decade of delays

Electricity in the north of Kosovo has been a political sticking point for years. In 2015, a 2013 energy agreement was finally settled and signed between Serbian President Aleksandar Vučić (then Prime Minister), and former Kosovar Prime Minister Isa Mustafa. The deal called for Elektromreža Srbije (EMS), Serbia’s electricity transmission company, to support KOSTT in becoming a member of the European Network of Transmission System Operators (ENTSO-E), an association that represents 35 countries and is “responsible for the secure and coordinated operation of Europe’s electricity system, the largest interconnected electrical grid in the world.”

It also called for registering a subsidiary of EPS, Elektrosever, to operate in the north of Kosovo and begin collecting payment for the unpaid electricity.

Elektrosever’s registration status and process has been a point of high contention. The recently signed agreement again calls for it to begin operating in the north of Kosovo after receiving a license from ERO, which it duly received just days after the latest agreement was signed. 

“I think if they fulfill all of the conditions and it is according to the dialogue, I do not see any problem. If they are in compliance now with the issues, Elektrosever will be like any other supplier in Kosovo, like KEDS,” said KOSTT’s Kadri Kadriu.

Dušan Radaković, director of North Mitrovica NGO Advocacy Center for Democratic Culture (ACDC), believes ERO and KEDS made it overly difficult for Elektrosever to register and receive a license to operate in the past. “Prishtina rejected the license for Elektrosever three times. Without the license they cannot operate,” Radaković said.

However, Gani Buçaj and ERO Chairman Ymer Fejzullahu reject these claims, telling K2.0 that Elektrosever tried to register for a license in 2020 when the board was not functional and that the other times Elektrosever applied with documents that suggested Kosovo was a part of Serbia, and were thus rejected. According to Dardan Abazi, “ERO’s board mandate ended on the 20th of December, and the Serbian company applied for the license on the 22nd, knowing that there was no board to approve it.”

The 2013 energy agreement was also supposed to grant “access to KOSTT, KEDS and ERO to the transmission and distribution infrastructure” in the north of Kosovo in order for them to be able to maintain and update the infrastructure. But according to Buçaj, Serbia hasn’t allowed KEDS or KOSTT access.

"It’s not practical. You cannot be there with special forces every time you want to read the meter."

Gani Buçaj, ERO

“Even our special forces, even if some employees of KOSTT go there, they are not allowed to enter. Physically, we are not allowed to enter the premises,” Buçaj said. “Even as a board member, for security reasons I cannot go there, even in North Mitrovica. Every time they go to operate they need special forces. It’s not practical. You cannot be there with special forces every time you want to read the meter.”

An additional hurdle in the whole issue has been Serbia’s unwillingness to sign an interconnection agreement with Kosovo. Fejzullahu said that “according to EU directives, every interconnection line needs to allocate capacity to traders, to sell and buy electricity.” Since Serbia refused to open capacity for Kosovo, if an international trader wants to sell electricity to Kosovo, they often must go through Serbia and then another country bordering Kosovo, for example Montenegro or North Macedonia, before the electricity can enter Kosovo. As a result, the costs are higher for the traders, suppliers and consumers. 

In February 2021, KOSTT filed a complaint to the Energy Community Secretariat, an organization that works to create an integrated pan-European energy market. The complaint accused Serbia and EMS of not allowing capacity allocation and commercial transactions along the four interconnection lines on the Kosovo-Serbia border and argues that this has “seriously impacted, impaired and limited commercial transactions in Southeast Europe and significantly increased the risk of power system imbalances.”

KOSTT reported that they made repeated attempts to contact EMS to create an interconnection agreement, but never received a reply. The European Federation of Energy Traders (EFET) addressed the relevant parties in a January 2021 statement urging both EMS and KOSTT to fix the situation, noting that it affects not only Kosovo and Serbia, but the rest of the region and “a large number of EFET member companies.”

If the roadmap is fully implemented, Serbia will have to begin opening this capacity to Kosovo to allow it broader access to the European electricity markets.

“They don’t support us, instead they create obstacles, they didn’t support Kosovo to become a member of ENTSO-E, this is how they joke with us,” said Fejzullahu, before asking Serbia to “please allow employees of KOSTT and KEDS to enter the four municipalities.”

One of the key pieces of infrastructure KOSTT and KEDS want access to is the Valač electrical transmission substation, just a few kilometers north of Mitrovica. The substation is a central piece of the four municipalities’ energy infrastructure.

ERO board member Gani Buçaj said that KOSTT and KEDS have ownership of Valač, but they have been unable to access the substation due to the possibility of conflict. Elektrokosmet currently operates Valač.

In KOSTT’s 2021 Annual Report, they stated that one of the problems affecting the company was the “inability to operate, maintain and develop a part of the transmission network of Kosovo, due to limited access to the northern part of the country, as well as the illegal intervention of Serbian operators EMS and EPS.”

Kosovo’s four northern municipalities used almost 38 million euros of electricity in 2021 that they didn't pay for.

Though the contested substation is run by Serbian operators, Kadriu claims that they follow KOSTT’s operation instructions. KOSTT has plans to refurbish the aging substation, and with the newly signed electricity agreement, this may be possible.

ENTSO-E recognizes KOSTT as the transmission system operator for the entire geographical region of Kosovo, which has implications for who, according to this European electricity organization, should be operating Valač.

In a statement for K2.0, a representative of ENTSO-E wrote, “What is a fact is that the North of Kosovo is part of the perimeter of KOSTT. […] Because of that KOSTT has the obligation to provide the electricity there if a supplier fails to do so, in order to balance their whole perimeter.

“KOSTT has to provide the electricity to balance its perimeter but cannot invoice it to anyone. Hence, their financial difficulties,” the statement concludes.

Kadriu said that KOSTT cannot continue to cover the north if they are going to continue losing money at the rate that they are. According to the recent GAP Institute report, Kosovo’s four northern municipalities used almost 38 million euros of electricity in 2021 that they didn’t pay for, a huge spike from their average 9 to 12 million euros of electricity per year recently.

Both Kadriu and Fejzullahu recognize that this year a permanent solution must be found and implemented, but integrating Kosovo Serbs into Kosovo’s systems remains a challenge. In the coming months KOSTT and other Kosovar institutions will find out whether the recent agreement will lead to a permanent solution to the decades-old problem.

In the end, photographer Milan Dobrić said, “if someone from the government told everyone to pay, I think we all would.”

Feature image: Atdhe Mulla / K2.0.

This publication was published with the financial support of the European Union as part of the project “Citizens Engage”, implemented by K2.0 in partnership with GAP Institute. Its contents are the sole responsibility of Kosovo 2.0 and GAP Institute and do not necessarily reflect the views of the European Union. 

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