Determinants of Costs and Prices for Electricity Supply in Slovenia

This paper analyzes determinants of costs and real prices for retail electricity supply in Slovenia. We estimate cost and price functions in a retail electricity distribution enterprise in Slovenia by ordinary least square regressions on time series data. We confirm the hypotheses that real costs for electricity supply are positively and significantly associated with the costs for purchases of electric energy from electricity producers/wholesalers and with remuneration costs in electricity distribution enterprises. We did not confirm a negative association between the real costs for retail electricity supply and the proxy variable for electricity market liberalization. Market deregulation and price liberalization with increased competition have caused an initial decline in real consumer prices of electric energy. We found that the real consumer price of electric energy is positively associated with producer/wholesaler prices of electric energy, real wages in electricity distribution enterprises, and real tax expenses in the distribution enterprise, but negatively associated with the variable for electricity market liberalization. The results confirm the crucial role of the transmission of producer/wholesaler prices of electric energy and costs within the distribution enterprises, including labor costs, on the consumer prices of electric energy.