The European commission has published an announcement related to the ongoing case for dominant position of Bulgarian Energy Holding (BEH) on the market for the wholesale supply of electricity at freely negotiated prices in Bulgaria. On the page of the Commission can be found a description of the case and the offered commitments from BEH.
The full communication published from the Commission could be read below or on the web page of the EC – HERE
Communication from the Commission published pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 in Case AT.39767 — BEH Electricity
(2015/C 202/02)
- INTRODUCTION
(1) According to Article 9 of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (1), the Commission may, in cases where it intends to adopt a decision requiring that an infringement is brought to an end and the parties concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment, decide to make those commitments binding on the undertakings. Such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the Commission. According to Article 27(4) of the same Regulation, the Commission shall publish a concise summary of the case and the main content of the commitments. Interested parties may submit their observations within the time limit fixed by the Commission.
2. SUMMARY OF THE CASE
(2) On 12 August 2014 the Commission adopted a Statement of Objections concerning an alleged infringement of Article 102 of the Treaty on the Functioning of the European Union (‘TFEU’) by Bulgarian Energy Holding EAD (‘BEH’) on the market for the wholesale supply of electricity at freely negotiated prices in Bulgaria (‘the free wholesale market for electricity’). This document constitutes a preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No 1/2003.
(3) The Commission’s preliminary assessment is that BEH is dominant on the market for the wholesale supply of electricity at freely negotiated prices in Bulgaria. The preliminary assessment expresses the concern that destination clauses which amount to territorial restrictions on resale of electricity contained in the contracts entered into by BEH subsidiaries for the wholesale supply of electricity at freely negotiated prices to entities other than end-users may constitute an abuse of that dominant position, within the meaning of Article 102 TFEU. In particular, the concern is that the contracts entered into between on the one hand BEH’s electricity production subsidiaries Natsionalna Elektricheska Kompania, Nuclear Power Plant Kozloduy and Thermal Power Plant Maritsa East 2 and, on the other hand, third party buyers, limit those buyers’ freedom to choose whether to sell the purchased electricity in the territory of Bulgaria or to export the electricity.
(4) The Commission’s preliminary assessment concludes that BEH’s practice has the potential effect of raising barriers to trade between Bulgaria and other Member States, thus distorting the allocation of electricity within the Single Market, and affecting liquidity and efficiency of electricity markets.
3. THE MAIN CONTENT OF THE OFFERED COMMITMENTS
(5) BEH does not agree with the Commission’s preliminary assessment. It has nevertheless offered commitments pursuant to Article 9 of Regulation (EC) No 1/2003, to meet the Commission’s competition concerns. The key elements of the commitments are presented below:
(6) BEH will set up a power exchange in Bulgaria, and will ensure that sufficient volumes of electricity (in accordance with Table 1 of the proposed commitments) are offered on an auction-based day-ahead trading platform on that exchange. In order to set up a viable and independent power exchange in Bulgaria, BEH will commit to:
(a) enter into an agreement with an independent third party with expertise in the operation of a power exchange, which will develop, set up and carry out all the market functions of a day-ahead trading platform on behalf of the power exchange;
(b) offer at least stipulated volumes of electricity on the day-ahead market of the exchange (which will increase each year in line with volumes traded by power exchanges in the region during their first years of operation) by means of liquidity provider agreements entered into between BEH and its subsidiaries and the power exchange; the pattern of volumes offered will vary on a monthly, daily and hourly basis following load profile patterns in Bulgaria;
(c) the volumes will be offered by BEH and its subsidiaries on the day-ahead market of the exchange at a maximum offer price based on the costs of BEH subsidiaries;
(d) initially, the volumes of electricity offered by BEH and its subsidiaries will be hourly products (2) only; as from the second year of operation, a proportion of the products can be offered as block products (of between 3 and 24 hours);
(e) divest ownership of the power exchange within six months after formal notification of the Commission’s decision and transfer its capital to the Bulgarian State, whose rights will be exercised by the Ministry of Finance.
(7) The duration of the commitments will start on the date of notification of the commitments decision and will end five years from the start of operation of the power exchange. BEH will also appoint a trustee that will monitor its compliance with the commitments.
(8) Further, BEH and its subsidiaries will cease and desist from including destination clauses, or any measure of equivalent effect, in their bilateral electricity supply contracts.
(9) These commitments should meet the Commission’s concerns by ensuring that the territorial restrictions in electricity supply contracts concluded by BEH subsidiaries cease and do not recur. A significant proportion of electricity will be traded on an independently-run day-ahead market on an anonymous basis, which means that the electricity sold cannot be traced and that its final destination cannot be determined at the moment of sale. The volumes of electricity that will be offered by BEH and its subsidiaries on the day-ahead market are intended to ensure liquidity on the exchange. Further, the day-ahead market on the power exchange will provide a public price index, thus improving transparency on the free wholesale electricity market and ultimately promoting integration with other EU Member State markets.
(10) The commitments are published in full in English (with a courtesy copy provided in Bulgarian) on the website of the Directorate-General for Competition at:
http://ec.europa.eu/competition/index_en.html
4. INVITATION TO MAKE COMMENTS
(11) Subject to market testing, the Commission intends to adopt a decision under Article 9(1) of Regulation (EC) No 1/2003 declaring binding the commitments summarised above and published on the internet, on the website of the Directorate-General for Competition. If there are substantial changes to the commitments a new market test will be launched.
(12) In accordance with Article 27(4) of Regulation (EC) No 1/2003, the Commission invites interested third parties to submit their observations on the proposed commitments. In this context, the Commission asks interested parties to comment in particular on the following questions.
(a) The volumes of electricity to be offered by BEH and its subsidiaries on the day-ahead market of the exchange are set out in the commitments published on the website of the Directorate-General for Competition. Do you consider that these volumes are appropriate in order to achieve the objective of developing a liquid day-ahead market on the power exchange in Bulgaria?
(b) Do you expect that market participants will purchase the volumes that BEH and its subsidiaries will offer on the day-ahead market, if the offer price is based on their costs?
(c) Do you consider that the possibility for BEH and its subsidiaries to offer block products of between 3 and 24 hours as from the second year of operation of the day-ahead market on the exchange would make trading more difficult? Would it change your answer to questions (a) and (b)?
(13) Answers and comments should preferably be reasoned and should set out the relevant facts. Third parties are invited to make comments also on all other aspects of the commitments. If you identify a problem with any part of the proposed commitments, the Commission would also invite you to suggest a possible solution.
(14) These observations must reach the Commission not later than one month following the date of this publication. Interested third parties are also asked to submit a non-confidential version of their comments, in which any information they claim to be business secrets and other confidential information should be deleted and replaced as required by a non-confidential summary or by the words ‘business secrets’ or ‘confidential’.
(15) Observations can be sent to the Commission under reference number AT.39767 — BEH Electricity either by e-mail (COMP-GREFFE-ANTITRUST@ec.europa.eu), by fax (+322 2950128) or by post, to the following address:
European Commission
Directorate-General for Competition
Antitrust Registry
1049 Bruxelles/Brussel
BELGIQUE/BELGIË
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(1) OJ L 1, 4.1.2003, p. 1. With effect from 1 December 2009, Articles 81 and 82 of the EC Treaty have become Articles 101 and, respectively, 102 of the TFEU. The two sets of provisions are in substance identical. For the purposes of this notice, references to Articles 101 and 102 of the TFEU should be understood as references to Articles 81 and 82 of the EC Treaty when applicable.
(2) Hourly product means an offer where the market participant states quantities to buy or sell at different price levels in a set of price steps defined for a specific hour. Each pair of price and quantity is handled as a point on a bid curve with linear interpolation between each pair.