The energy regulator launches the new mechanism for electricity for household consumers

On June 3, the Energy and Water Regulatory Commission (KEWR) will hold a public discussion of the amendments and supplements (draft) to the Regulation on the Regulation of Electricity Prices. This is necessary due to the amendments to the Energy Act, adopted earlier in May this year, which envisage full liberalization of the wholesale electricity market from July 1 this year. As well as a new mechanism for compensating household electricity consumers. We recall that the concept of "regulated market" has been dropped.

The regulation provides for the process of full liberalization of the wholesale electricity market. As well as a mechanism to ensure a smooth transition to market-based prices for household end customers.

As the experts from the EWRC working group point out in their report, the amendments provide for:

·       removal of the figure "public electricity supplier";

·       determination of the estimated monthly availability for electricity production of the producers from which the public supplier will purchase electricity;

·       the amount of electricity in accordance with which the public supplier will conclude transactions with end suppliers.

"In this regard, the obligation of the Energy and Water Regulatory Commission (EWRC, the Commission) to approve prices at which:

· producers within the framework of their determined availability sell electricity to the public supplier is abolished;

· the public supplier sells to the final suppliers the purchased electricity for the needs of the regulated market and the final suppliers sell electricity to household end customers for sites.

The Commission has been given powers to determine a base price of electricity for 1 MWh (excluding VAT), which the household end customer should pay for the relevant regulatory period;

· determines the component of the price of the end supplier in relation to the supply of electricity to household end customers.

The regulation also provides that each month EWRC shall determine compensation to cover part of the costs of household end customers for electricity purchased from an end supplier, and it is regulated how this compensation is formed.

As is known, the funds for these compensations will be provided by the Security of Electricity Fund electricity system” (FSES).

According to the Regulation, the component of the final supplier’s price in relation to the supply of electricity to household end customers is determined at an amount of up to 7 percent of the determined base price of electricity for 1 MWh.

In addition, the energy regulator will be able to “determine hourly, seasonal and other tariff structures of the base price of electricity for 1 MWh, which the household end customer should pay for the relevant regulatory period.”

The Regulation also regulates how final suppliers who will buy electricity on the exchange will be compensated, mainly referring to a new option in the “day-ahead market” segment. This does not mean that the options offered by the other segments of the Bulgarian Independent Energy Exchange are excluded, specifying the amount of compensation for final suppliers in such a case.

“For the purposes of calculating the weighted average price attributable to the respective end supplier for the respective month, in the case of purchased electricity in other market segments and mechanisms, the achieved real weighted average price of the respective market segment and/or mechanism for the respective month shall be applied, but not higher than the weighted average price of a market segment one day ahead for the respective month,” the amended terms of the Regulation state.

The amendments aim to require end suppliers to report their revenues when determining the compensation. At the same time, “each quarter, when determining the amount of compensation, the regulator will make an adjustment with over- or under-collected revenue formed by applying a tariff structure to the base value of electricity for 1 MWh during this period, and this adjustment may be deferred.”

During the transition period to full liberalization of the retail market, end suppliers are obliged to supply end household customers at a price representing the sum of the base price of electricity determined by the EWRC and the end supplier's price component.