Amendments to the Electricity Trading Rules prepared by EWRC received support from market participants

Positive. This is the assessment of the market participants on the draft amendment and addition to the Rules for Trading in Electric Energy (PID of PTEE). This became clear during the public discussion that took place in the Commission for Energy and Water Regulation.

By their essence, the amendments provide for the adoption of a completely new methodology for determining prices of balancing energy. As well as bringing the Rules into line with the amendments to the Energy Act, which regulate the activities of the operators of closed electricity distribution networks, as well as the operators of electrical energy storage facilities. The new amendments clarify the provisions concerning the payment of network services and the price for obligations to the public.

The proposed Methodology for determining the prices of balancing energy, which is an application to PTEE, aims to create a mechanism for calculating the costs of balancing coordinators of balancing groups in each settlement period, regulation status, imbalance position (surplus/shortage) and payment direction. The new methodology is based on the results of the performed simulations with the achieved real data for the period 01.10.2022 - 31.12.2022 after the introduction of the 15-minute settlement period.

The Methodology project does not allow the creation of incentives for market participants to deliberately be in a position of artificial shortage or artificial surplus. At the same time, the shortage and surplus prices are equidistant from the Day-ahead market segment price of the organized electricity exchange market. Moreover, cash flows follow the imbalance position of the system, i.e. regardless of whether the market participant is in surplus or deficit, it is treated as a balancing energy supplier and receives payment from the operator if it helps the system, i.e. if its imbalance is opposite to the systemic imbalance, it pays accordingly in the same direction of the systemic imbalance. The methodology contains a table that allows balancing group coordinators to easily calculate their group's imbalance costs for each settlement period.

In addition to the adoption of a new Methodology for determining the prices of balancing energy, the changes in PTEE create regulatory prerequisites for the operators of closed electricity distribution networks and the operators of electrical energy storage facilities to participate in the electricity markets. In this way, their equality with other commercial participants and the opportunity to fully carry out their activities is guaranteed. The amendments also regulate the relations between the participants of the energy markets and the respective operators of electricity networks in connection with the services provided by the operators. Clarity is also created in the relations of the commercial participants with the operators of electric networks and with the "Security of the Electricity System" Fund.

With the changes in PTEE, a fairer distribution of costs for imbalances between commercial participants in the electricity market is achieved. This will improve the efficiency of the balancing market and contribute to achieving energy supplies at minimum costs. At the same time, obstacles are created for individual participants to take advantage of previous market deficiencies by deliberately choosing to be short/surplus rather than trying to predict their group's balance as accurately as possible. The PTEE amendments will also contribute to the overall integration of operators of closed electricity distribution networks and operators of electrical energy storage facilities as full participants in the electricity markets. The regulatory changes upgrade the current mechanism for payment of network services and price for obligations to society, facilitate payments between end customers, producers and operators of electrical energy storage facilities with suppliers, network operators and the Electricity System Security Fund, as well as between network operators themselves.

With few exceptions, the participants in the public debate expressed their principled support for the changes proposed by EWRC in PTEE and defined them as timely and contributing to the proper functioning of the market. At the same time, some of the participants asked for a delay in the entry of the rules. In particular, ESO representative Nikolay Iliev made a proposal to the EWRC to postpone the entry into force of the settlement rules from the 1st to a subsequent month. Iliev's reasoning was that the ESA "will need about a month to bring its market administration system into line with the new mechanism.”

Elektrohold, Energo-Pro and Elektrorazpradelenie Yug also asked for a postponement, but from the new price period from July 1 of this year.

The Commercial Director of NEK Ventsislav Markov expressed his principled support for the change in the rules and especially in the price formation part of balancing energy. In particular, the formation of the price of surplus and shortage and the introduction of a single price in some of the situations. In the main situations, it will be uniform, i.e. will not be predictable in advance by the participants, and therefore they will seek to introduce a balancing schedule for consumption and production, and not stay in one of two states - of surplus or shortage before the delivery period, he said. The representative of NEK expressed hope that the proposed methodology will normalize the market, which will also lead to less use of some of the regulation resources, which are otherwise reserved for reserve. At the same time, Markov pointed out that the current change will affect other segments of the market, referring to the Supplier of Last Resort (SPI).

The proposed three groups of amendments are expected, timely and necessary, commented Zornitsa Genova from Elektrohold.

"According to the project, it is proposed that the methodology come into force from April 1. It is our opinion that the introduction of the methodology should be preceded by tests in order to assess the change in the way of balancing and, accordingly, how the balancing costs of trading participants will change. The latter is also particularly important for merchants, who will eventually have to reflect this change in their contracts with their end customers. To conduct the tests, we believe that the ESO should provide information to trading participants on the regulation status for each settlement period for the previous month, and from this data it should be clear whether the trading participant was helping the system or increasing the systemic imbalance.

Additionally, we believe that in order to ensure transparency and clarity in balancing, the information on the regulation status of each settlement period should be generally available information and as such should be provided by the ESO," Genova pointed out. From this point of view, she suggested that the new PTTE methodology should come into force from the beginning of the new price period, namely from July 1.

Support for the proposals for the amendment of the Electricity Trade Rules and the vision for entry into force on July 1 is also shared by Energo-Pro and Elektrorazpradelenie yug. In addition, EWRC will probably have to provide more clarity regarding the network services of the energy storage operators, judging by the questions raised by the electricity distribution companies, incl. "Golden Sands".

"For a period of about 3 months, we want to receive settlement results for each of its periods. The independent transmission operator applies a balancing methodology that determines the balancing price, with results provided weekly. We did not see such application of the regulation reflected in the rules," said Krasimir Zhivashki, executive secretary of the Association of Electricity Traders in Bulgaria (ATEB). He also supported the words of NEK representative Venceslav Markov about the need to specify the price of DPI.

"We think that it should be clarified what will happen to the marginal prices, whether they will remain in this form. Arrangements for access to balancing price formation data should also be addressed. Ivaylo Naydenov, executive director of the "Bulgarian Federation of Industrial Energy Consumers" (BFIEC) also stated this.

Lawyer Georgi Toshev from the Institute for Development and Management of Resources (IDMR) specified that the effects of the introduction of the 15-minute settlement are not clear. "There is a risk of artificially raising prices, it remains to be seen how it will affect them, plus there is no measurement data. We have to make the methodology so that it can be used by the end user in a crisis," said attorney Toshev.

The Bulgarian Photovoltaic Association and the Hydropower Association mainly engaged in written submissions.

Former deputy Georgi Samandov, who took part as a citizen, also expressed support for the current amendments to the Electricity Trade Rules, but also expressed relevant reservations, given the need for further legislative actions.

However, it is more likely that there will be no suspensory clause, judging by the response of the head of the working group and director of the Electricity and Heating Directorate at EWRC Plamen Mladenovski. He even expressed surprise at the ESO's request for a postponement until April 1. In response to the questions, Mladenovski again explained that with the proposed changes, the regulator introduces legal changes in the by-laws. According to him, the amendments to PTEE should be introduced without delay, because now an absurd situation has been created in the market, which deforms it, and a number of participants have a financial incentive to deliberately remain in short supply. As it became clear from the explanation of the director of EWRC, in such a situation, even with tests for a longer period, the data will be distorted. The opinion was expressed that maintaining the current situation leads to shortages in the entire energy system and threatens the energy security of the country. Mladenovski also justified the need to change the Methodology for determining the prices of a Supplier of last resort, which, however, requires legal changes, which must be made by the acting National Assembly. He specified that the Methodology was largely borrowed from the German and Dutch operators. At the same time, he expressed an expectation from the electricity distribution companies, NEK, ATEB, BFIEC and other participants in the public discussion to submit more comments in their written opinions on some of the texts in the part about the order, conditions and ratio in the payment of network services and price for obligations to society, as well as on transit transactions.