Croatia's HEP fails to pay €22.5 million for renewable energy sources

CROATIA: Power utility Hrvatska Elektroprivreda (HEP) has failed in obligations to invest the money collected from Croatian consumers for the past two years to fund renewable energy sources, an audit of the company has revealed.

Leo Begovic admitted the company was having difficulties settling debt
Leo Begovic admitted the company was having difficulties settling debt

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HEP was supposed to pay the total of HRK 200 million (EUR 27.4million), collected in 2008 and 2009 via the country's tariff system, to the Croatian Energy Market Operator (HROTE) by the end of last year, but failed to do this. After a warning in late 2009 from the HROTE, only HRK 35 million (EUR 4.8 million) of the total amount was paid.

The shortfall emerged following an extraordinary audit of the company. HEP's current chairman Leo Begovic admitted the company was having difficulties settling this debt due to liquidity problems.

Despite the delay by HEP to transfer the money, the HROTE has been regularly paying the incentives for the renewable energy sources, according to HROTE board chairman, Leo Prelec.
The HROTE and energy regulator HERA now dispute which organisation is responsible for rectifying the problem.

Tomo Galic, president of the board of HERA, claims that HEP's violation of contractual obligations does not fall within his scope of responsibility. "We supervise the implementation of the tariff system for electricity prices; who owes to whom is not our business," said Galic. He says HEP and HROTE have their supervisory boards, which should deal with disputes between the two companies.

However, regulations on the functioning of Croatia's electricity market state that "supervision of the operators in the market will be carried out by HERA", and that HERA will resolve all disputes arising from the work of operators in the electricity market.

Croatian Prime Minister, Jadranka Kosor, has ordered the economy ministry to establish who is responsible.

A tariff system designed to promote renewables by guaranteeing a fixed basic payment has been in place in Croatia since March 2007. The feed-in price is guaranteed for 12 years from the date of contract effectuation. For wind power plants with a power smaller than 1MW the feed-in tariff for 2009 was HRK 0.6967 (EUR 0.095), while for those over 1 MW it was HRK 0.7076 (EUR 0.096). The fee is charged on the electricity bill as a separate billing item.

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