AICB: Extreme energy balancing prices for the month of May threaten the financial security of the market and the energy system

The Association of Industrial Capital in Bulgaria (AICB) shares the concerns of companies from the energy sector, according to which the huge amounts for imbalances threaten the financial security of the companies. Particularly affected in this regard are the companies involved in the production of renewable energy. In its position, AICB insisted on urgent corrections to the energy market to avoid the crisis that will cover RES producers and businesses in the coming days. Here is the entire position of the employers, sent to the caretaker government and EWRC.

In connection with the public announcement of energy balancing prices for the month of May 2024, covering the period 01-31.05.2024, which may endanger the financial security of the market in the energy sector, the security of the electricity system and which in their essence represent a kind of "extreme" calculated value levels, the Association of Industrial Capital in Bulgaria (AICB) in its capacity as a nationally representative employer organization brings to your attention the following

POSITION

The Association of Industrial Capital in Bulgaria and its members have repeatedly signaled the possible problems that the newly adopted Methodology may cause in its actual application. We already have a clearly defined problem, which arises from the new calculation according to the newly adopted by EWRC Methodology for determining the prices of the balancing electric energy according to art. 21, para. 1, item 11 of the ZE, promulgated, SG, no. 37 of 26.04.2024, in force from 01.05.2024. Both associations of electricity traders - ASEP and ATEB, whose position we support in principle, signaled the same.

After the publication by the independent transmission operator on 12.06.2024 of the final prices for balancing electricity, we are witnessing precisely the problems that are created during the actual application of the new Methodology. From the final prices announced in this way, it is clear that the price values ​​for shortage and surplus drastically differ from the forecast data previously reported by ESO EAD.

The final prices in question are generally defined as unreasonably high by all participants in the electricity market in Bulgaria. In the final settlement for the month of May, price values ​​were published, reporting a surplus of up to -2,684.50 BGN/MWh and noting a shortage - up to BGN 6,342.00/MWh. As a result - the final balancing costs for the month of May 2024 of the balancing group coordinators manage to exceed tenfold all possible forecasts and in their nature represent a categorically unforeseen and unsecured commercial risk.

This risk arises on the basis of the simultaneous consideration of both the factually established above and the circumstances that occur in the case of already valid commercial contracts concluded with the customers of the energy operators and suppliers of these services (consumers and producers) at the effect of the already canceled and well-functioning old EWRC Methodology until the month of May. It is necessary to add to the problem the activity carried out by the coordinators, to which at a very extreme moment an overwhelming financial burden is transferred, which the regulator has obviously not yet assessed and taken into account during the next drastic "ad hoc" changes in the regulation of the electricity sector.

From everything presented so far as cumulative information about the problem, highlighting the significant gaps in the regulations, we want to point out that in the current situation, balancing group coordinators are forced to directly re-invoice the balancing costs for the month of May 2024 to their customers, due to lack of to any other adequate opportunity to respond to the problem that has arisen. Even with the undertaking of this urgent action by the organizations operating in the energy market in our country, the very possible series of bankruptcies in the sector will not be prevented. The latter, in turn, will provoke a series of legal disputes and general financial uncertainty in the energy market.

It should also be pointed out that the already sent data on imbalances will also increase the guarantee collateral to ESO EAD - an increase that, given the situation, most coordinators will not be able to fulfill, and as a consequence, ESO EAD will most likely have to terminate the participation of these organizations on the electricity market in our country.

AICB shares the strong concerns expressed by ASEP and ATEB and as an employer organization is very concerned that the probability of destroying an entire sector of the economy related to the construction and maintenance of plants from renewable energy sources is extremely high. We draw your attention to the fact that the RES producers themselves do not have the opportunity to cover the costs outlined above and will be forced to cease operations, which will inevitably lead to a systemic risk of inability to manage the electricity system in Bulgaria.

AICB would like to draw attention to an important consequence that will turn out to be inevitable, namely - the objective inability of a large part of the coordinators and energy companies to fulfill their balancing obligations due to the unacceptable levels of prices for shortage and surplus as of 01.07.2024., forcing them to send their customers to a supplier of last resort. This, in turn, will cause a serious danger to their own financial stability and provoke a "financial avalanche" of instability in the sector.

Everything that has been said so far raises serious concerns among AICB members and, accordingly, among its leadership for the country's energy security. It clearly does not correspond to the beliefs of the Association for the implementation of balanced, competitive, fair and commercial-based policies in support of the electricity market and the economy of our country in the sector, insofar as otherwise we would become complicit in a series of endless palliative initiatives in the sector " Energy", which will not have the necessary lasting and useful result for our economy.

There is a serious violation of all prerequisites for ensuring equal conditions of competition, in which electricity companies are subject to transparent, proportional and non-discriminatory rules, fees and treatment, in particular in the area of ​​the obligation to balance (art. 2, para. 1, item 14 of EL).

We hope that the Ministry of Energy of the Republic of Bulgaria and EWRC will take into account the position stated above and will comply with the significant comments and concerns made by ASEP and ATEB, behind which AICB also stands as a nationally representative organization of the employers.

AICB fully joins the appeal made by ASEP and ATEB for urgent intervention of all competent authorities to deal with the situation in the shortest possible time, presented in an appendix to this letter. The financial stability of the market and the security and future of the Bulgarian energy industry as a whole will depend on the solution of this important issue.