The Energy Management Institute (EMI) published an article presenting the role of the Supplier of last resort (SoLR) in Bulgaria
On July 5, 2013, the State Energy and Water Regulatory Commission announced its decisions on the issuance of 5 new licenses – those for the activity of electricity supply by a supplier of last resort.
What does a SoLR do according to Bulgarian law? The SoLR should supply electricity (or natural gas) to customers who have not selected another supplier or the selected supplier does not deliver for reasons beyond the customer’s control (for example, due to the supplier being declared bankrupt or liquidated, license revoked or otherwise), led to a temporary or permanent interruption in the supply of electricity.
Which companies in the country are in charge of the functions of SoLR? License for supply of electricity from SoLR according to the Energy Act is issued to:
- the licensee for the activity public supply of electricity – for the customers connected to the electricity transmission network (i.e. NEK EAD);
- licensees for the activity of electricity supply from the end supplier – for the customers connected to the respective distribution network (i.e. – EVN Electricity Supply, CEZ Electro Bulgaria, ENERGO-PRO Sales and DSO Golden sands).
Accordingly, the licenses for electricity supply issued in 2013 by SoLR (subsequently supplemented with the rights and obligations related to the activity of “coordinator of a special balancing group”) are the following:
- To National Electric Company EAD – License №L-408-17 / 01.07.2013 for a period of 26 years;
- To ENERGO-PRO Sales AD – License №L-410-17 / 01.07.2013 for a period of 26 years;
- Of CEZ Electro Bulgaria AD – License №L-409-17 / 01.07.2013 for a period of 26 years
- To EVN Elektrosnabdyavane EAD – License № -413 / 8.07.2013 for a period of 26 years;
- ESP Golden Sands Ltd. – License №L-411-17 / 01.07.2013 for a period of 26 years.
Where does SoLR buy energy for its customers? Pursuant to §17, item 1 of the Transitional and Final Provisions (TFP) to the bill amending the Energy Act (SG, issue 59 of 05.07.2013, in force from 05.07.2013) until 30 June In 2015, SoLRs were obliged to purchase the necessary electricity for their consumers only from the Public Supplier (NEK EAD). After this date, SoLR received the right to conclude transactions for purchase of electricity for its customers and at freely negotiated prices, as the price of electricity is determined according to a methodology approved by the EWRC.
What will be the role of the SoLR in the forthcoming step towards further market liberalization from October 1, 2020?
In a situation of migration from the regulated to the free market, the supplier of last resort must ensure that customers who are obliged to leave the regulated market but have not yet chosen a supplier / trader from the free market, will still have electricity.
From July 1, 2021, all non-domestic low-voltage customers who have failed to transition to the free market will find themselves in a similar situation. We remind you that with the amendments to the Energy Act of 2012, all end customers using medium voltage electricity were in a similar situation after they lost their right to be supplied on the regulated market and had to enter the free market.
What is the profile of non-domestic customers connected to a low voltage network? This is a set of about 300 thousand small consumers from the economic and public sector with a total annual consumption of 4.5 million MWh. These include schools, hospitals, kindergartens, as well as companies in the service sector such as hairdressing salons, tailoring and shoe workshops, law firms. After their transition to the free market, only household consumers (households) with an annual consumption of about 10 – 10.5 million MWh of electricity will remain on a regulated market.
What is the schedule of the planned process? The draft law amending the Energy Act, voted on second reading by the Parliament on 17.06.2020, envisages that from 1 October 2020 the supply of non-residential customers from a final supplier at regulated prices will be suspended, ie it is planned to bring this segment of consumers to the liberalized market..
In case that by September 30, 2020, a non-residential customer has not concluded a contract with an electricity trader at freely negotiated prices, the supply of electricity will be made by its current supplier – the final supplier, but already in its capacity of holder of a trading license. This delivery will be made on the basis of a standard contract with customers, a sample of which will be approved by the EWRC by August 31, 2020.
The model contract will regulate the rights and obligations of the parties, the conditions for supply of electricity and the termination of the contract as a possible maximum period of its validity is from October 1, 2020 to June 30, 2021. Until the conclusion of the standard contract, the supplier – ensures the supply of electricity, provided that the customer pays all amounts due related with the delivery.
Procedurally, once the legal changes enter into force, the four final suppliers have 30 days to notify their non-residential LV customers that from October 1, 2020 they can no longer be their suppliers, as well as to publish on their websites a list of non-residential customers who are obliged to enter the free market from 1.10.2020.
From July 1, 2021, customers who have not chosen a supplier – trader on the free market, will be supplied by SoLR. By the same date – July 1, 2021 – according to the bill amending the Energy Act – the full liberalization of the wholesale electricity market must be completed.
Electricity prices of SoLR
How are SoLR energy prices determined? SoLR sells energy to its customers only under the “One tariff plan. The price is formed as a sum of three components: the price of the purchased electricity, the costs for balancing energy and price for performing the activity of SoLR.
The relations between the customers and the SoLR are regulated in contracts under publicly known general conditions, in compliance with the Energy Act and the Electricity trading rules. The energy prices calculated in this way on the basis of the mentioned rules do not include the “Obligation to society fee”.
Where is more expensive – with SoLR or on the regulated market?
The energy prices of SoLR – CEZ, SoLR – EVN and SoLR – ENERGO-PRO change monthly and range from 149 to 191 BGN / MWh. These price levels are drastically higher than the prices on the regulated market for non-domestic low voltage consumers, which do not change for the whole year and are in the low range of 97 to 107 BGN / MWh for the three companies.
Where is it more expensive – at SoLR or on the free market?
Assuming that a low-voltage household consumer has entered into a contract with a trader for the supply of electricity at a price determined on the basis of the average monthly price on DAM of IBEX plus a fee, then its prices by months would be in the low range from 67 to 122 BGN / MWh.
It can be summarized that the energy supplies from SoLR were the most expensive for the period from the beginning of October 2019 to the end of March 2020 – the achieved average price of 164 BGN / MWh for SoLR is about 60% above the respective prices on the free and the regulated market.
As highlighted in a previous EMI publication, the European practice is similar: SoLR energy prices in most European countries are on average higher than the prices paid by consumers served by other suppliers. There is no Member State in which the energy sold by SoLR is generally cheaper than a comparable standard product. ACER finds this a good practice as it encourages consumers to switch to a provider other than SoLR. If the price of the SoLR is set lower than the average market price, there is a risk of market distortion as it discourages consumers to leave SoLR and seek a supplier on the liberalized market.
Source: Energy management Institute
