Which consumers can enter the free market?
Currently the free market is available for all types of consumers – business and households. A mandatory requirement applies only to the high and medium voltage consumers to be supplied by a provider on the free market. The amendments to the Energy Act of June 2020 introduce an obligation for all business consumers to enter the liberalized market from October 1, 2020. This means that even the smallest businesses such as shops, cafes, law firms, etc. will have conclude a supply contract with an electricity trader on the liberalized market.
How to enter the liberalized market?
All you need to do to enter the liberalized market is: first to contact an electricity trading company (electricity trader) and second to sign a contract for purchase and sale of electricity with the company. Then it will make the transfer from regulated to liberalized market. Through the contract concluded with the trader, you allow him to submit on your behalf an application for initial registration on a liberalized market, as well as to conclude contract with the relevant network operator and with the supplier of last resort (SoLR). Before concluding the contract with the trader, he will ask you for additional information regarding: the sites that will be supplied; client number; data on consumption, measurements and other information if necessary. It is important to pay all your electricity bill to your current supplier so that you can enter the liberalized market.
What contract do I sign with the electricity trader?
The contract is for purchase and sale of electricity, but for most customers, traders will offer a combined contract, which includes the purchase and sale of electricity, participation in a standard balancing group and payment for network services. Through this combined contract, you agree that the trader will supply you with electricity, provide balancing services and be entitled to collect network and other fees that are part of the electricity bill.
What happens if I do not sign a contract with an electricity trader?
In case you have not concluded a contract with an electricity trader by September 30, 2020 inclusive, the supply of electricity from October 1, 2020 will continue to be performed by your current supplier on the regulated market, but he will act as an “electricity trader” on the liberalized market. For this to happen, however, you need to sign a standard supply contract with him. The model of a standard contract will be defined by the Energy and Water Regulatory Commission by 31.08.2020. The validity of the standard contract will be until June 30, 2021. After this date you will have to sign a contract with a trader on the liberalized market. If for some reason you do not enter into such a contract, you will be supplied by a Supplier of Last Resort (SoLR). Keep in mind that the prices at which SoLR sells electricity are significantly higher than those on the liberalized or regulated (tariff) market. Therefore, if you are supplied by SoLR, we advise you to switch to a trader on the liberalized market as soon as possible to get a fair price.
How are payments made on the liberalized market?
Most often, payments are made by a bank transfer or through payment service companies (e.g. EasyPay) within a few days of receiving the invoice. If the customer does not pay for the electricity, the trader has the right to request from the network operator to suspend the electricity supply of the site belonging to the customer. The electricity prices are negotiated between the customer and the trader and are part of the contract or are appendix to it. In addition to the price of electricity, customers on the liberalized market also pay network fees (transmission and access to the transmission and distribution network), the fee “Obligation to society”, balancing costs, excise duty (2 BGN/MWh) and VAT. All these additional fees have been paid by the customers on the regulated market. An exception is the fee ” Obligation to society ” (OS), which was not included in the invoice, but was part of the price of electricity. On the liberalized market, the OS On the regulated market, they are included in electricity price. On the liberalized market, most traders offer a price for electricity with balancing costs included. This means that on the liberalized market in most cases the cost of this service will be included in the electricity price and will not appear as a separate row in the invoice.
What deadlines do I have to comply with?
- -The contract with the electricity trader must be concluded by the 10th of the current month in order for the trader to submit the application for entering the liberalized market. If the application is submitted by the 10th of the current month, the change will take effect on the 1st of the following month. Hence, if you plan to enter the liberalized market from October 1, the deadline for concluding a contract with an electricity trader is September 10, 2020.
- The duration of the contracts offered by the traders is usually 1 year. It is possible to negotiate with the trader shorter or longer period of validity of the contract.
What will be the price for electricity?
Most retailers offer two types of contracts. Some have a fixed price of electricity for the whole contractual period. The others have a variable (exchange) price, ie. the prices correspond to the hourly prices on the Day-ahead market of the Bulgarian Independent Energy Exchange (IBEX). This means that for each day for each hour you will pay a different price, which corresponds to the sport market prices for the respective day and hour. Under this type of contract, traders also charge a fee for the service of purchasing electricity from the power exchange and delivering it to the consumer. Usually the customer negotiates only the amount of this fee with his trader. This type of contract is often called “Exchange. Because the liberalized market is a market at freely negotiated prices, it is possible to negotiate other price plans other than those explained. For example, the two tariff price – day and night prices and other options.
How do I contact an electricity trader?
The Association of Traders with Electricity in Bulgaria unites some of the leading traders in the country. The contacts of ATEB members can be found at the tab Members, when you click on their logos: http://ateb.bg/en/%d1%87%d0%bb%d0%b5%d0%bd%d0%be%d0%b2e/ . To submit an inquiry, we advise you to use their emails or fill out the special forms available on their websites.
What are the advantages for the customers to enter the free market?
The competitive environment for electricity trading leads to a decrease of the price of electricity and an increase of the quality of services. Customers have the option to choose their supplier and to negotiate the terms and conditions of the contracts and select billing option, as well as to request additional services related to the power supply.
In addition, the customers could freely change their supplier and pick the best services that meet their needs.
Are there risks from entering the free market?The liberalization of the electricity market is an irreversible process that follows the directives of the EU and Bulgaria, as a member state, will carry it out to the end. In case the supplier isn’t able to fulfill the terms and conditions of contract, the consumer has the right to choose a different supplier. There is no risk for the consumer of not being supplied with electricity. Even of his supplier is unable to deliver, the client will automatically be transferred to the Supplier of last resort, who will service the consumer until the later chooses another supplier on the free market.
What is the mechanism of buying and selling electricity?
The deals on the free market are done between generators, traders and consumers of electrical energy. The generators produce and wholesale through the platforms of Independent Bulgarian Energy Exchange (IBEX). The traders as an important link between the supply and demand create portfolio of generators, from which they buy and customers to which they sell. The traders buy the electricity from generators, from IBEX or from other traders from Bulgaria or abroad (import). The sales on the other hand are made to customers, IBEX and to other traders in the country or abroad (export).
How does the free electricity market work?
Customers can choose their electricity trader, but not their network operator. The distribution network is owned by the distribution companies (CEZ Distribution Bulgaria AD, Elektrorazpredelenie Yug EAD, Elektrorazpredelenie Sever AD), which remain responsible for the quality of supply and network maintenance. By entering free market, the customer must sign two contracts – one with his retailer/trader and one with the distribution company. At the end of each month the client receives two invoices: – one from the trader for the consumed active energy, excise and price “obligations to society”, and one from the distribution company for transmission and access services.
What is a balancing market?
The electricity is a commodity that could not be stored. That is why it is required to maintain real time balance between generation and consumption in the electricity system in the country. Due to this fact the electricity deliveries are registered ahead of time for 24 hours on an hourly basis. To reach a balance in the system, the consumers should notify their suppliers for their planned consumption, then the supplier prepares a forecast for the demand of all of his customers for the next day and ensures that an equivalent volume will be purchased from the generators. When there is a mismatch between the declared volumes and the actual consumption or generation in the system, the balancing market steps in and clears the imbalances – the difference between the declared and the real consumed/generated quantities. The balancing market has the function to stimulate accurate forecasts. Because of that the prices of balancing energy are determined in a way to punish financially the mismatches and to impose additional expenses in case of imbalances.
What is a balancing group and is there any benefit in participating in it?
With the goal to reduce the imbalances traders create and coordinate the so called balancing groups, which unite different end consumers and/or generators. In this way favorable conditions are created so the excess or lack of electricity cancel out within the balancing group. This leads to reduction of the overall imbalance of the group. As a result, the imbalances are significantly lower compared to the cases, when the end consumers are doing the balancing themselves. With the latest regulatory changes all customers are obliged to join a balancing group and pick a coordinator, who will forecast their consumption and manage the imbalance.
Usual market practice is that the traders are forecasting and balancing the deviations in the consumption of their customers. In that way traders are taking the financial risks for the realized imbalances. With that kind of a model the client pays only the consumed electricity and a small fraction for balancing services and all the other expenses related to the management of the trading portfolio and the compensations for imbalances are paid by the traders.
Which is the current legal framework regulating the electricity trading?
The electricity trading in Bulgaria is regulated mainly by the Energy Law, the Electricity trading rules and the rules of IBEX. Their current versions could be found on the web page of each of the aforementioned organization.