The disputed auctions on the energy exchange for 24.06 and 25.06 were reorganized for another date 28.06.2019. Since the conditions and prices of these auctions were not changed, ATEB once again informed the Ministry of Energy and the institutions of their negative impact. Below is the position of the association on the issue:
DEAR MRS. PETKOVA,
We appeal to you as the principal of the Ministry of Energy and the companies within the Bulgarian Energy Holding asking for urgent restoration of the liquidity on the liberalized market. Since 17.01.2019 no auctions have been conducted for the sale of long-term products from NPP Kozloduy and NEK, which negatively affects industrial and business clients in Bulgaria. This uncertainty and lack of offering threatens over 60% of the revenues in the sector, including revenues from electricity purchases, network charges, obligations to society fee, excise duty and VAT.
Instead of restoring the offering of long-term products, once again this week we are witnessing an attempt for purchase of large volumes of electricity at sub-market prices.
In order to stop this practice and eliminate the possibility of speculation with the prices of state-owned power generators, we propose:
- Power producers part of BEH to be restricted from participating in auctions initiated by buyers;
- BEH power producers to organize open, transparent and competitive long-term auctions (one-way), offering equal opportunities for all participants;
- To publish the names of the companies that won auctions initiated by buyers.
Our new concerns are related to the announced 6 auction for Friday (28.06). They were published yesterday (24.06.) at the end of the day and are totally identical to the auctions from Monday (24.06), about which we informed you at the end of last week:
There were no deals concluded on Monday’s auctions. We also urge now for timely action to prevent potential deals that will distort the market.
Again we highlight the controversial parameters of these auctions, which are organized by different market participants, but with almost identical conditions:
- Auctions for purchase;
- The delivery period of the product excludes the planned annual overhaul of NPP Kozloduy, implying that the potential seller is the plant
- Similar individual conditions;
- All auctions, require the entire amount to be offered in a single bid, which means there can be only one winner of the auction;
- Same prices. The announced prices are significantly lower than the reference market price (89 BGN/MWh) determined by the EWRC. The asked price on the auctions is also significantly lower than the regional futures for Q3 2019 and Q4 2019, which are traded on the Hungarian exchange, respectively for 109.3 BGN/MWh and for 118.82 BGN/MWh. This means that the price asked at the auctions is from 25.3 to 34.8 BGN per megawatt hour lower than the market expectations. The same is true for the auctions for baseload product for 2020 (86 BGN/MWh). For comparison, the baseload for 2020 with delivery in Bulgaria is quoted on the European Energy Exchange (EEX) at a price of 113.4 BGN/MWh, which is a difference of 27.4 BGN/MWh compared to the price of the announced auctions. On the German power market this product is traded on 25.06.2019 for 95.25 BGN/MWh and on the Hungarian for 117.15 BGN/MWh. If these auctions scheduled for 28.06.2019 are successful, they will result in a loss for the power producers in BEH of about 50 million BGN.
The volumes asked at the auctions are significant and would have a negative impact on the liberalized market. If such deals occur at prices well below market rates, all other market participants will be in disadvantage, therefore we call for cancellation of the auctions until the circumstances that led to their initiation are clarified.
If the purpose of such auctions is to provide cheap electricity for some of the Bulgarian business consumers, we do not support the way how this is done. Such auctions are distorting the market and negatively affecting all trading participants. We believe there are other means to help business consumers, such as the already made discounts on the electricity fees. It is not appropriate some consumers to receive support in the form of auctions at 25% below market rates and by withdrawing volumes from the liberalized market in a vulnerable period.
Please note that the liberalized market accounts for 62% of the consumption in the country and guarantees the stability of the sector. Such deals, if executed, undermine its principles and foundations and favor only few companies instead of all market participants.