At its last meeting, the Council of Ministers approved the new program for compensating the costs of electricity for non-household end consumers, as well as network operators for purchasing electricity to cover technological losses. The two programs cover the period from 01.07.2022 to 30.09.2022.
The indicative budget for the program amounts to 2 448 458 566 BGN of which BGN 2 301 083 602 for business consumers and 147 374 964 BGN for network operators. The funds will be provided by the Fund “Security of the Electric System” (FSES), from additional targeted contributions to the fund coming from the state-owned Kozloduy NPP, TPP Maritsa East 2 and NEK.
The amount of compensation for businesses is calculated as the difference between the average monthly Day-ahead market price and the fixed price of 250 BGN /MWh. Compensation for customers with prices below the base price of 250 BGN /MWh is not acceptable.
FSES will pay the compensation under the program. The funds will be transferred to the electricity suppliers after they have invoiced the compensations in the form of a discount of the electricity bill of end consumers. The conditions and procedure for submission of applications by the suppliers, their examination and the payment of compensations are determined in a contract. The sample contracts are approved by the Management Board of FSES and are published on the fund’s website. FSES will check whether the invoices issued by the suppliers have included compensation. After the checks are completed, the FSES will transfer the money to the traders.
Even if the suppliers have included the compensations, FSES will not make a payment if: the budget specified in the program has been reached, there are not enough funds or the Ministry of Finance does allow for making the payments. This puts suppliers at risk, because the amount of compensation significantly exceeds the amount of payments they will receive from end customers. Due to higher electricity prices and forecasts for levels of 700 – 800 BGN /MWh in the third and fourth quarters of 2022, a situation will arise where traders will receive larger payments from the FSES , rather than from the end consumers. For example, at a market price of electricity of 800 BGN /MWh, the supplier will receive 250 BGN /MWh from the client and will expect 550 BGN /MWh from the fund. A possible non-payment by the fund condemns electricity traders to bankruptcy.
The transfer of the funds, if it goes normally according to the procedures stipulated in the contract with the FSES, will be carried out within 10-15 days after suppliers issue the first invoices to their customers. This delay is significant and will put electricity traders at risk of falling into a state of illiquidity, which may lead to the inability to continue purchasing electricity from the power exchange.
In an event of longer delays, as is currently the case, the problem may become extreme and suppliers may become insolvent to IBEX, which will put them at risk of being excluded from the electricity market.
It should be known that the additional administrative work and the financial risk of the deferred compensation payments are borne entirely and free of charge by the electricity suppliers. The current mechanism exposes suppliers to an excessively high risk of not having funds to purchase electricity for end customers and is a prerequisite for disruption in the electricity market.