Changes in the Bulgarian Energy Act for more transparency on the free electricity market

Bulgaria

Since the Bulgarian Independent Energy Exchange was launched in January 2016, all market participants expected that it would ensure market transparency, and that any market participant that meets certain conditions could participate. It was hoped that it would create a non-discriminatory, competitive, and liquid market environment based on the principles of real demand and supply of electricity. In practice, if a liquid electricity exchange and appropriate legal measures were not in place, it would result in a distorted market model and unfair competition, which would consequently slow down the development trend of a liberalised electricity market.

Establishing a liquid electricity exchange is a complex process that requires the necessary regulatory base. These reasons motivated the legislator to make changes to the Energy Act, which would help to promote more transparent and fair trade in electricity. In Bulgaria, there is still a hybrid model of trade in electricity - a regulated and free market, whereby the changes affect the second pattern of trade at freely negotiated prices.

From 1 January 2018, any electricity transactions with a total installed capacity of over 5MW will be obligated to be realised on the stock exchange. Electricity producers will no longer be able to use their own auctions to place electricity on the free market. This will also apply to off-quota production for plants that the Energy and Water Regulatory Commission include in the regulated market quota. The obligation to sell on the exchange will also apply to renewable energy source plants of more than 5MW. This will only apply after they have reached the maximum effective hours of work, for which they receive preferential prices, as assigned by the Energy and Water Regulatory Commission. This will also apply to the production of cogeneration outside high-efficiency production, which is also purchased at preferential prices.

In addition, the legislator also legally defined the term ‘stock market’ as the aggregate of all organised market segments operated and administered by the operator of the stock market where physical energy transactions are concluded. Further, "Stock Market Operator" is defined as the person who holds a license to organise this activity.

The minimum sanction for those who violate the provisions of the Energy Act has now been reduced from BGN 200,000 to BGN 20,000.

For more information on this topic please contact Maria Drenska