Energy

In the course of 2009, activities related to strengthening of electricity and gas market continued. In the field of natural gas, the following subordinate legislation was adopted, based on the Gas

Market Act25, which completes the legislative framework for that field: General terms and

conditions for natural gas supply26, Network rules for gas distribution system27, Rules for the gas

storage system28, Network rules for the transmission system29 and Ordinance on natural gas market

organisation30. In addition, market activities were separated from regulated activities and operators

for individual activities in the field of gas were introduced, including operators for LNG terminals

and natural gas storages. As regards gas supply safety, the Regulation on natural gas supply safety31

was adopted at the end of 2008, in connection with Directive 2004/67/EC.

In the field of electricity, the process of further development of market relations based on the bilateral agreement model has continued. Contractual parties in a bilateral agreement for the supply of electricity are the buyer and supplier, whereas contractual parties to the bilateral agreements on the purchase of electricity are the supplier, trader or producer. By October 2009, 47 666 buyers used their status of a privileged buyer, whereby they have taken advantage of the right to contract electricity independently for their own market needs. Their total contracted annual consumption of electricity amounts to 8.2 TeraWattHours (TWh), accounting for more than 50% of the overall annual electricity consumption in Croatia.

25 _{Official Gazette 40/07 and 15/08} 26 Official Gazette 43/09 27 _{Official Gazette 50/09} 28 _{Official Gazette 50/09} 29 _{Official Gazette 50/09} 30 Official Gazette 50/09

Although the Croatian electricity transfer system is connected to the neighbouring systems very well, further connecting with neighbours has continued once 400 kV between Croatia and Hungary was put into operation, having enabled thus the first connection between the former CENTREL system and the UCTE system in 1999. In 2009, the construction of a double 400 kV power- transmission line between Ernestinovo (CRO) and Pech (HU) continued and it is planned be completed in 2010. Connecting with Bosnia and Herzegovina also continued by putting a reconstructed 220kV power-transmission line Mraclin – Prijedor into operation in April 2009, which was out of operation since 1992 due to the war. The Croatian and Serbian transmission system operators are considering a possibility of further connecting Croatia with Serbia.

On the basis of the Plan for development, modernisation and construction of the gas transmission system in Croatia from 2007 to 2011, which was adopted by the Government of the Republic of Croatia in 2006 and which anticipates the procurement and installation of equipment which will enable functioning of the secondary market and the gas network development in southern Croatia, the envisaged activities have continued with the planned dynamics. In March 2009, the Croatian and Hungarian gas transport system operators signed an agreement on the construction of a pipeline that will connect these two countries and thereby provide the assurance of gas supply in the Republic of Croatia. Activities regarding the construction of the LNG terminal on the island of Krk, managed by a consortium of foreign companies, have also continued.

In order to ensure market relations, activities aimed at strengthening the administrative and technical capacities of the Croatian Energy Regulatory Agency, which at the moment counts 49 employees, and the Croatian Energy Regulatory Agency (HERA), which, pursuant to the new legislation, apart from the electricity market has become competent for natural gas market, have continued.

In the sector of oil and oil derivatives, in December 2009 the Croatian Compulsory Oil Stock Agency (HANDA) created the Programme of Activities of the HANDA aiming at ensuring the maintenance of the compulsory 90-day stock of oil and oil derivatives until 31 July 2012. At the moment the Republic of Croatia maintains the level of stock of oil and oil derivatives in line with the negotiating position dynamics. Preparation activities for construction of new warehouse capacities which will serve this purpose are in progress. Activities will be carried out in line with the Plan for Delivery, Dynamics of Formation and Replacement of Compulsory Stocks of Oil and

Oil Derivatives, Storage Organisation and Regional Layout32.

On 16 October 2009, the Croatian Parliament adopted the Energy Strategy of the Republic of Croatia until 2020. The Strategy is harmonised with the EU energy policy. The primary objectives of the Strategy include competitiveness of the energy sector, energy supply safety and sustainable development. Furthermore, the EU objectives were transposed into the objectives of the national energy policy.

In December 2008, the Act on Energy Efficiency in Direct Consumption33 was adopted, followed

by the Act on Biofuels for Transport34. In 2010, the adoption of the National Action Plan for

Renewable Energy Sources until 2020 is expected, which will be drafted in compliance with the objectives set in the Energy Strategy of the Republic of Croatia until 2020.

32 _{Official Gazette 149/09} 33

Official Gazette 152/08 34 _{Official Gazette 65/09}

Parallel to the development of the new Strategy, the Republic of Croatia Energy Efficiency Programme until 2016 was prepared, along with the first National Action Plan for Energy Efficiency. Furthermore, the adoption of the National Potential for Cogeneration in the Republic of Croatia is expected in the first quarter of 2010. Based on guidelines from the National Action Plan for Energy Efficiency and in co-operation with the UNDP the implementation of the following programmes is in progress: ‘House in Order’ and ‘Systematic Energy Management in Cities and Counties’. The action plan creates a comprehensive database on all public facilities and their energy consumption, which will provide insight into energy consumption in the entire public service sector.