Electricity

Bulgaria’s energy bill to liberalize wholesale power market, introduce energy communities

Law on Energy Bulgaria bill liberalize wholesale power market energy communities

Photo: Council of Ministers

Published

September 8, 2023

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Published:

September 8, 2023

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The proposed changes to the Law on Energy are heading to Bulgaria’s parliament. It would fully liberalize the wholesale electricity market at the beginning of next year while households will no longer have regulated prices from 2026. The bill introduces energy communities and aggregators and defines the criteria for identifying vulnerable energy consumers and homes at risk of energy poverty.

The Council of Ministers of Bulgaria approved the amendments to the Law on Energy, transposing several European directives. The text drew strong criticism from the Energy and Water Regulatory Commission (EWRC or, in Bulgarian, KEVR), trade unionists and ombudsman Diana Kovacheva.

The proposed changes are leading to the full liberalization of the wholesale electricity market on January 1. The role of state-owned National Electricity Co. (NEK), part of Bulgarian Energy Holding or BEH, would be abolished alongside production quotas within the regulated market.

The gradual deregulation of power prices for households is scheduled to start in 2026

The law stipulates that households would remain in the regulated market until the end of 2025, after which prices in the segment would be gradually deregulated. They also get the right to switch suppliers.

According to the document, suppliers of electricity to the residential sector will purchase up to 60% of the energy for the sector through auctions and long-term contracts, using public support measures in the form of financial guarantees and contracts for differences. The aim is to reduce volatility risk.

The government envisaged the possibility of subsidizing residential electricity customers until 2026.

Trade union claims civil energy communities weren’t appropriately defined in proposed Law on Energy

If the proposal is adopted, it will introduce citizen energy communities, active customers and aggregators to the electricity market. In the opinion of the Confederation of Independent Trade Unions in Bulgaria (CITUB or KNSB), the definition of civil energy communities and related provisions partly match the ones for renewable energy communities, which may cause confusion.

A licensed third-party operator should be imposed above a limit in capacities that it suggests to be determined for individual civil energy communities and active customers, the organization added.

CITUB asks from where would electricity for energy-poor households be purchased

The proposed version of the Law on Energy also fails to determine which fund would be used to purchase energy to compensate poor households, and where,  – on the free market or from a local source and at lower prices, for example the Kozloduy nuclear power plant, the statement reads.

The trade union’s lawyers highlighted the introduction of power purchase agreements, PPAs, and similar contracts for electricity from “low-emission sources,” including nuclear plants. They exclude coal- and gas-fired power plants, forcing the operators of such facilities to sell output in short-term markets and making planning difficult, according to CITUB. It claimed that coal plants would be closed before 2030 under the proposed conditions.

The bill opens the possibility for more than one electricity exchange, which will probably lead to the entry of branches of large European exchanges into Bulgaria, the trade union stressed.

Energy regulatory body sees power price spike in January

EWRC, the energy regulator, warned that prices of electricity for households would jump dramatically already in January, with the opening of the wholesale markets. It said the move should be delayed at least until July 1, when the new regulatory year starts, as it can’t fulfill the price approval deadlines.

Suppliers can’t be expected to manage to obtain the required amounts of electricity for households in time, and also for 60% to be with low emissions and through long-term deals, according to EWRC. The necessary platform for bilateral deals cannot be established by the end of the year either, in its view.

The panel urged the authorities to establish a transitional model for the period until the liberalization of the residential market that would ensure stability.

Denkov: We won’t allow surge in electricity prices for homes

Prime Minister Nikolay Denkov responded to the objections by vowing that an increase in the price of electricity for households wouldn’t be allowed. In addition, the government has decided to lower the income ceiling for electricity producers so that it can collect more money for funding the security of supply measures.

The new Law on Energy is set to introduce fixed-term and fixed-price contracts for consumers as well as contracts with dynamic prices for the ones that have smart electricity meters. Ombudsman Diana Kovacheva said the bill was supposed to enable a tool for households to compare prices. In a statement issued during the public discussion process, she stressed that the draft amendments didn’t sufficiently protect citizens’ rights.

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