The Energy Community Regulatory Board (ECRB) recently published its second biennial report on best practices in electricity network tariff methodologies in the Energy Community countries. The report was prepared by the ECRB with the active participation of all regulatory authorities from the nine contracting parties: Albania, Bosnia and Herzegovina, Georgia, Kosovo, Moldova, Montenegro, North Macedonia, Serbia, and Ukraine. The document is 138 pages long and represents the most detailed systematic review of network tariff regulation for the Southeast Europe and Black Sea region.

The report was prepared in accordance with Article 18 of Regulation (EU) 2019/943 on the internal electricity market, adapted and adopted within the framework of the Energy Community. It builds upon the first report from 2023, reflecting changes in tariff methodologies since 2022 and assessing progress in implementing the ECRB’s previous recommendations. Furthermore, it takes into account the recommendations in ACER’s 2025 report on tariff practices in Europe, which provides the analysis with an additional comparative framework between the contracting parties and EU member states.

On the one hand, it provides a detailed picture of regulatory practices in Bulgaria’s immediate neighbors and trading partners—Serbia, North Macedonia, and Montenegro. On the other hand, it formulates specific recommendations, the implementation of which will inevitably impact the regional market and set new parameters for regulatory dialogue within the Energy Community.

Legal and Regulatory Framework: Progress in Transposing the Market Integration Package

One of the report’s key findings is that the transposition of the Electricity Integration Package is the main driver of reforms in network tariffs across the region. As of the report’s publication date, four contracting parties—Moldova, Montenegro, North Macedonia, and Serbia — had made progress with transposition, with their national laws now requiring regulators to account for new categories of network users, discuss the introduction of time-of-use tariffs, and establish a regulatory framework for flexibility services.

The institutional framework for tariff regulation remains stable—in all contracting parties, national regulatory authorities (NRAs) develop and/or approve tariff methodologies. At the same time, the report notes tensions between the regulator’s independence and interventions by other state bodies. In Moldova, the tariff methodology is subject to approval by the Ministry of Justice and the National Anti-Corruption Center, although the final decision rests with the NRA. In Ukraine, the introduction of incentive-based regulation requires coordination with the Ministry of Economy and the Ministry of Energy. The ECRB explicitly emphasizes that, under the Electricity Directive, only NRAs are responsible for approving tariff methodologies, including the type of regulation, regulatory parameters, and tariff design.

Type of Regulation and Quality of Service

Incentive-based regulation predominates in the region, and most contracting parties apply a revenue cap approach, while Albania is the only one using a price cap. Georgia and Montenegro apply hybrid models combining elements of cost-based and incentive-based regulation. Cost-plus regulation remains in effect in Bosnia and Herzegovina, Serbia, and Ukraine; in the case of Ukraine, this is explained by the exceptional conditions under martial law, which make the transition to incentive-based regulation inappropriate in the short term.

Significant progress has been made in service quality regulation. By 2026, five contracting parties (Albania, Georgia, Kosovo, Montenegro, and Ukraine) will apply a quality factor in their distribution tariff methodologies, representing an improvement over 2022. Montenegro plans to implement targets for the SAIDI (System Average Interruption Duration Index) starting in 2027, with a reward/penalty mechanism capped at 2% of the regulator’s allowed revenue. In North Macedonia, the regulator is required to adopt regulations for monitoring technical and business indicators of supply quality in 2026. This trend is in line with the ECRB’s recommendations, which strongly urge all NRAs to introduce quality regulation into tariff methodologies for transmission and distribution network operators.

Cost Structure and Coverage, Transition from Volume-Based to Capacity-Based Tariffs

The report reveals a critical gap in the region: the majority of contracting parties continue to apply entirely volume-based, consumption-based (energy-based) distribution tariffs, even though the bulk of network costs are fixed and based on connected capacity. Only Bosnia and Herzegovina has applied a combination of volume-based and capacity-based elements in its transmission tariff from the very beginning. North Macedonia is introducing a lump-sum fee for access to the distribution network in 2023. Kosovo plans to introduce capacity-based tariffs, and Georgia intends to introduce a fixed component in the distribution tariff starting in the 2031–2035 regulatory period.

The ECRB has formulated a clear recommendation based on ACER’s approach: capital/infrastructure costs should be covered primarily through capacity (or power) tariffs reflecting the provided grid connection capacity; variable costs (technological losses and part of operating costs) should be covered by volumetric tariffs, and costs that correlate neither with energy nor with capacity should be covered by fixed (lump-sum) fees per connection point or per meter. This transition is essential for stabilizing operators’ revenues in the context of growing distributed generation, active consumers, correspondingly decreasing amounts of energy for distribution, and new consumption patterns.

Tariffs for feeding energy into the grid and treating prosumers

Only a few contracting parties apply feed-in tariffs at the transmission level, and at the distribution level, only Montenegro has introduced such tariffs. Montenegro is also the only country that, starting in 2022, applies a capacity component (rather than just a volume component) in distribution tariffs for producers (for feeding energy into the grid). The main argument for introducing such tariffs is that a certain portion of grid costs is generated by consumers feeding energy into the grid, not just by those drawing energy from it.

The treatment of prosumers deserves special attention. The report notes that in most contracting parties, prosumers connected to the distribution network pay tariffs only for net energy (withdrawal minus injection), i.e., they apply netting. The ECRB characterizes this approach as a source of cross-subsidization and recommends that existing schemes that do not separately account for electricity injected into and consumed from the grid be phased out. As of January 1, 2027, such schemes should not be offered to new consumers in the contracting parties, in accordance with the requirements of Article 15(4) of the Electricity Directive.

Connection fees and cascading of costs

Transmission connection fees in most contracting parties are based on a deep or semi-deep approach, whereby new consumers cover all or part of the costs of reinforcing the upstream network. In distribution, however, the shallow fee predominates—in six contracting parties, the consumer pays only for the direct connection. Georgia applies a flexible approach with a deep, shallow, or semi-shallow fee depending on the type of connection.

The report notes a specific problem: in some contracting parties, new producers pay lower connection fees than consumers. The ECRB explicitly warns that while a differentiated approach for new technologies may facilitate their integration into the grid, it must be time-limited until specific integration goals are achieved.

Regarding cost cascading, the report finds that at the transmission network level, this is not applied in most countries. In distribution, however, a universal approach is in place: consumers at lower voltage levels pay for a portion of the costs at higher levels. Reverse cost passing (from HV to LV) is not applied in any country. The ECRB recommends the introduction of cost granularity at least by voltage level and customer type as a basis for future improvements in tariff design.

Time-of-use and location-based signals show limited progress

One of the most notable gaps in the region is the extremely limited application of time-of-use (ToU) tariffs. Only Montenegro and Serbia apply ToU tariffs at the transmission and distribution levels, while Bosnia and Herzegovina applies them only at the distribution level. All other contracting parties do not apply time-of-use differentiation. Location-based signals in tariff design are virtually absent throughout the region.

The ECRB has formulated a recommendation worthy of attention: even in the absence of smart metering, NRAs should establish a regulatory framework for ToU tariffs as an option for consumers, and this in itself could serve as an incentive for consumers to switch to smart meters. This logic is practically important for countries with low smart metering deployment rates and reverses the usual argument that ToU tariffs must wait for the full deployment of smart meters.

Case Study from Ukraine and the Specifics of Martial Law

The report contains a detailed case study on Ukraine that deserves special attention due to its unprecedented nature. NEURC (the Ukrainian regulator) has adapted the regulatory framework to address the consequences of Russian military aggression: updated regulatory accounting for assets in occupied territories; corrective factors introduced for equipment in government-controlled territory; the rate of return for distribution system operators on the front lines is set at 3%, and for those whose owners are subject to sanctions—at 0. The first regulatory period under incentive-based regulation has been extended, and the deadlines for achieving quality targets have been postponed.

Separately, Ukraine is implementing a roadmap to decouple costs for supporting renewable energy from the transmission tariff—a reform that must be completed by 2030. This case is not merely informative; it demonstrates how extreme circumstances necessitate a pragmatic deviation from standard regulatory approaches without abandoning the long-term principles of cost recovery through tariffs.

Energy Transition and New Categories of Consumers

The report identifies a significant regulatory gap regarding new categories of grid consumers. Storage facilities, electric vehicle charging points, aggregators, and energy communities are, in practice, not integrated into the tariff methodologies of most contracting parties. Only Moldova has introduced a reduced distribution tariff for shared electricity from energy communities, with a 30% reduction for local communities and a 15% reduction for regional communities. Kosovo has adopted rules for new principles of distribution tariff methodology, including prosumers, generators, and storage facilities, but the methodology itself has yet to be developed.

The ECRB recommends that NRAs assess the impact of storage on grid costs and consider a tariff design that supports the operation of storage in a system-oriented mode. Any special treatment must be justified and regularly reviewed to avoid undue cross-subsidization. This position is fully consistent with Eurelectric’s position on the same topic, which we wrote about earlier.

Conclusion

The ECRB report is an extremely valuable analytical tool for several reasons. First, it provides a comparative basis for assessing regulatory progress across nine neighboring jurisdictions, allowing for the identification of best practices and areas of lagging performance. Second, the recommendations set out a concrete path toward regulatory convergence: the introduction of capacity components in tariffs, the introduction of time-of-use (ToU) tariffs, and the regulation of quality and transparency in tariff setting. Third, the report explicitly addresses the challenges of the energy transition, ranging from the need for forward-looking grid investments to pilot models of innovative regulation.

Full text of the report: Energy Community Regulatory Board (ECRB), Best Practice Report on Tariff Methodologies in the Energy Community, March 2026.