EC: Bulgaria Should Abolish Regulated Electricity Prices

Bulgaria in EU | October 13, 2014, Monday // 17:25|  views

Photo by EPA/BGNES

The European Commission has recommended that Bulgaria abolish regulated electricity prices in a report on the internal energy market.

The report, which takes stock of the progress of EU Member States towards the completion of the integrated energy market, argues that Bulgaria should gradually abolish the existing quota system for power plants in the regulated segment of the market and the current single-buyer model.

According to the report, Bulgaria should also gradually phase out regulated electricity prices also for households and small and medium-sized businesses connected at low voltage and take necessary steps towards a competitive retail market.

Bulgaria is also advised to strengthen the independence of the national regulatory authority and its administrative capacity in the energy sector.

To attract independent producers and traders, efforts on establishing a well-functioning balancing market including putting into place an organized independent power exchange and day-ahead market should be increased, according to the EC.

The report draws attention to the fact that Bulgaria’s domestic market is dominated by the Bulgarian Energy Holding and its daughter, the national electricity supply company Natsionalna Elektricheska Kompania EAD (NEK) and characterized by an overcapacity in electricity generation.

Traditionally Bulgaria is a net electricity exporter, according to the EC.

Bulgaria’s retail electricity market is characterized as highly concentrated, with 8 out of total 24 power retailers controlling 92% of the market in 2012.

From the beginning of 2013, the market was only regulated at the low voltage level.

Although electricity consumers are allowed to switch to a different supplier, no actual switching is observed as the regulated prices for household consumers entail no benefit in changing the supplier and no incentive for traders to enter this segment, according to the EC.

The retail electricity market in Bulgaria is by far the lowest scoring in the EU (48.9 points compared to 72.0) and has seen a highest decrease in score (6.9 points) since 2012.

The market is also at the very bottom of the domestic ranking of 31 services markets.

Bulgaria’s retail electricity market scores the lowest or second lowest on all components surveyed (comparability, trust in providers, overall consumer satisfaction, choice of providers, problems, switching and ease of switching), except for the proportion of complaints (which are just below the EU average).

Bulgaria’s total installed capacity in 2012 was 13.8 MW, with the peak load of 7.8 MW observed in February 2012.

Furthermore, an effort should be made to accelerate the implementation of electricity interconnection points and enhance the capacity to cope with disruptions.

According to the EC, Bulgaria is one of the largest electricity exporters in South Eastern Europe, and thus faces no particular security of supply issues.

Bulgaria’s electricity transmission has not faced any significant problems related to security of supply and congestions in the electricity system, including the cross-border capacities.

To increase the security of supply in the Burgas region, the EC recommends the construction of two new 400kV substations and three 400kV lines in the North-Eastern part of Bulgaria, accommodating the high penetration of renewables in the region and allowing the North-South connection.

As regards Bulgaria’s gas market, the EC points out that Bulgaria remains fully dependent on a single source of gas on a single route by a single supplier.

The EC draws attention to the fact that Bulgaria has only limited domestic underground storage capacities that could help in balancing disruptions in high demand periods.

The EC recommends the completion of gas grid interconnections with neighboring countries, stressing that the existing ones are very poor, while other projects are still under development.

To ensure security of supply, there are possibilities for reverse physical flow of natural gas from Greece and, after eventually reaching an agreement, from Turkey.

According to the EC report, a completed internal energy market could bring net economic benefits between EUR 16 and 40 B each year.

The EC argues that an integrated EU energy market is the most cost-effective way to ensure secure and affordable supplies to EU citizens and mitigate climate change.

In a previous report issued early in October, the Commission put Bulgaria into a group of six countries where "deficits in power tariffs" can be seen, citing a World Bank report as well as its own analyses.

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Tags: European Commission, EC, electricity prices, energy watchdog, gas market, energy market, Single Energy Market, EU member states, gas grid interconnection, NEK, National Electric Company


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