August 30, 2017 / 2:30 PM / a year ago

Serbia's EPS power utility seeks 2 pct price hike

BELGRADE, Aug 30 (Reuters) - Serbia’s state-run power utility Elektroprivreda Srbije (EPS) is seeking to increase retail electricity prices by 2 percent from Oct. 1 to adjust for higher inflation, the Energy Ministry said on Wednesday.

EPS last increased prices by 3.8 percent a year ago, following a 12 percent rise in 2015.

In a statement, the ministry said that following consultations with World Bank experts, EPS was seeking a permit from the country’s Energy Agency (AERS) for the price hike.

In July, Serbia’s inflation stood at 3.2 percent, in line with the central bank’s 2017 target of 3 percent, give or take 1.5 percentage points.

“This is the lowest price increase so far and it will affect the monthly bill of average consumers by 68 dinars (0.5717 euros),” the statement said.

A protracted drought and soaring temperatures have lowered water levels across the Western Balkans, hitting hydropower output and driving spot power prices higher.

EPS produces all of Serbia’s annual consumption of 38 gigawatt hours. It operates six coal-fired power plants with a combined capacity of 4,302 megawatts (MW), accounting for two thirds of its entire output, with the remainder coming from hydropower plants.

Its production was affected at the beginning of 2017 as a lengthy cold spell froze rivers and affected production in coal-fired plants.

Earlier this month, EPS said that due to drought its hydropower output in June-August was 35 percent lower than a year earlier. To compensate, it has increased production at coal-fired plants.

To avoid social discontent, successive Serbian governments have kept electricity prices low and have heavily subsidised EPS through banking guarantees.

But the government of Prime Minister Ana Brnabic is under pressure from the International Monetary Fund, which wants Belgrade to cut subsidies and make EPS, which employs more than 30,000 people, more profitable.

($1 = 0.8961 euros)

1 euro = 118.9339 Serbian dinars Reporting by Aleksandar Vasovic; Editing by Mark Potter

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