The electricity market in Bulgaria is in the process of gradual liberalization, which started in 2004 and also continues today. The market consists of two parts – a segment with regulated prices and a segment with freely negotiated prices or the so called “open market”.
Prices in the regulated segment are set by the regulator – Energy and Water Regulatory Commission (EWRC); consumers are served by end suppliers on a territorial basis and are not obliged to change their electricity supplier. At present, this segment includes domestic consumers and business customers, connected to the low voltage distribution network.
Customers in the free segment can change their electricity supplier regardless of their geographical location. They continue to pay the prices for transmission and access to the network that they are connected to. On the open market the regulatory functions of EWRC are limited to defining some mandatory fees part of the final energy price. The electricity price is paid by the traders and the end industrial consumers based on freely negotiated prices between them and the generation companies. According to the rules for trading with electrical energy the contracts based on freely negotiated prices could be made between:
- Generators and:
- Electricity traders
- End consumers, registered on the open market;
- Electricity traders and:
- End consumers, registered on the open market;
- Other electricity traders.
In compliance with the liberalization process, the internal electricity market in Bulgaria has been founded on the model of two-sided contracts and balancing market. The customers sign contracts in which they declare their daily energy consumption profile that is as close as possible to their actual consumption and the generators on the other hand are obliged to generate those amounts. When there is mismatch between the declared amounts and the actual consumption or generation in the electrical energy system, the balancing market steps in. The energy supplied by the balancing market clears the mismatches between the consumed/generated quantities of energy.
For a long time the main players on the open market have been big generators like NPP “Kozloduy” and “Maritza East 2″, NEC, large energy consumers and Bulgarian and foreign traders. In 2013 began an active migration of customers, connected to the distribution network medium voltage (6-20 kV), from the regulated to the open market segment.
As of August 1, 2013 customers who have not chosen a supplier of electricity are supplied by the geographical service provider, called “supplier of last resort”, but at higher than market prices.
Business consumers of “low voltage” can still buy electricity at regulated prices that are higher than those that can be negotiated on the open market. The act of entering the open market leads to a reduction of energy costs for the consumer and does not carry the risks, associated with additional financial costs or security of supply. Like on the regulated market the respective distribution company will continue to be responsible for the maintenance of the infrastructure and quality of electricity, regardless of who is your retailer on the open market, and you will continue to pay regulated prices for “access” and “transmission “.
Role of the traders
The electricity traders are the link between the different energy generators and the end consumers on the open market. The role of the trader is to offer attractive financial conditions to the energy consumers and at the same time to guarantee the reliability and the resilience of the supply. At the moment there are more than 100 active companies having a license for electricity trading in Bulgaria. Most of them offer 30% lower energy prices than those on the regulated market.
Every energy consumer has a specific energy profile, depending on its specific production processes. This profile has to be very well determined and foreseen by the trader, so the energy supplied could fully cover the needs of the consumer. Usually the traders’ portfolio includes a mix of generation plants and clients, ensuring security regarding the supply and production. The traders perform forecasting and balancing of the deviations in the consumption of its clients and take the financial risk for the realized imbalances (mismatch between the forecasted and the real consumption). The client pays only for the energy used while all the other expenses related to balancing and compensating the mismatches are covered by the traders.
Selling electricity to the end consumers is performed on equal terms for both sides and by individually negotiated contracts for every customer. The administration and management of the load schedules as well as all administrative procedures related to electricity trading are performed by the traders. To ease their customers most of the companies trading with electricity offer preparation of all relevant documents required for registration of the consumer on the open market as well as preparation of a detailed analysis of their energy consumption. Based on it the traders could offer various energy profiles, which are individual solutions for the client specific energy needs.
Other important role of the energy traders in Bulgaria is to provide opportunities for export of the energy generated in the country and to ensure its realization on the foreign markets. Most of the electricity for export is sold abroad through energy traders. They are responsible for contracting clients over the country borders and provision of trans-border capacities bought from the Transmission System Operator (TSO), so that the generated energy could pass the Bulgarian border and be distributed to the buyers abroad. By being part of this process the energy traders ensure an income in the energy sector in the country, due to the fact that more than 98% of the revenues from the deals go into state owned plants and companies – NPP “Kozloduy”, TPP “Maritza East” 2, NEC, TSO. As an effect of the process the optimum load of the local power plants leads to positive effect on country’s mining industry, increase of the employment rate in the energy sector and strengthens the economy of the country.
Sources: EWRC, NEC, web page of ENERGEO, web page of Energy Financing Group