AOBR's proposals for changing the electricity market model

On 09.02.2022, AOBR sent its proposal to amend the model of the electricity market in Bulgaria to Prime Minister Kiril Petkov. The letter is published in its original form.

TO

MR KIRILL PETKOV

PRESIDENT MINISTER

OF THE REPUBLIC OF BULGARIA

Ex. No. 03-00-2/09.02.2022

RELATED: Proposals to change the model of the electricity market in Bulgaria with a view to guaranteeing the long-term supply of the platforms of BNEB EAD   

DEAR MINISTER-PRESIDENT,

For more than six months now, Bulgarian business has been exposed to the adverse effects of increased electricity and natural gas prices on a European scale. The price situation in the energy markets puts both small and medium-sized businesses, as well as large electricity-intensive industries, in a difficult position.

We welcome the planned compensatory measures for the first quarter of 2022. Their adequate implementation is an important support for the energy costs of all consumers buying electricity on the free market. However, we would like to note that the compensatory mechanisms, which are in force from October 2021, are a short-term measure that temporarily and partially eases the bills of end users.

We believe that in order to achieve a more sustainable, long-term model, in which the interests of consumers and producers will be equally protected, the organization of the electricity market in our country should be reviewed, taking more targeted measures.

We believe that the main defects of the electricity market in our country are:

• the lack of a long-term supply of basic energy at an affordable price for six-month and annual periods - the market supply of bilateral contracts is insufficient, short-term (weekly contracts dominate), uneven and at high prices from the most expensive plants;
• the huge share of short-term trading – about 80%, at 30 – 60% for other markets;
• high activity of commercial participants realizing the acquired electricity for export – almost 9TWh for the past year 2021.

To the above we should also note the dominant position of the BEH EAD group companies on the electricity market on the supply side - a share of about 70%.

Therefore, together with the developed compensatory mechanism, we propose to take measures to guarantee the long-term supply of basic electricity from low-emission sources, which will satisfy the domestic consumption in the country - through 12-18-24 monthly contracts. This will guarantee price stability for Bulgarian consumers on the free market. The financing of the compensatory model can be organized according to the example of other European countries as a redistribution of funds from excess income to low-emission producers. In the meantime, while it is implemented, tender procedures can be effectively organized for the long-term supply of electricity at price levels corresponding to the already defined threshold above which the compensation mechanism is triggered. These amounts of electricity should only be determined for domestic market consumption that is easily ascertainable, e.g. from the FSEU in line with the amounts collected as liabilities to society.

We also draw attention to the fact that when developing the concept of creating a pool of entities - non-domestic users (hospitals, municipalities, social homes, schools, etc.), for which the state can negotiate a lower price - legal entities with non-agricultural aim. The latter do not carry out commercial activity and cannot include the high price of electricity in goods and services intended for the market.

We propose to create an interdepartmental working group at the Ministry of Education, in which experts from the nationally represented employer organizations will also participate.

In the attachments to this letter, we present several models adopted in a number of European countries, from which elements can be adapted, as well as information about the electricity market in our country.

Applications: According to the text

WITH RESPECT, 
GOOD MITREV
Chairman of the Board of BSK
and AOBR Chair for 2022,
by order of AIKB, BSK, BTPP and KRIB