Bulgarian Energy Exchange Starts Operating on 1 January 2016

After the trial period effective as of 8 December 2015 the Bulgarian Energy Exchange is expected to start officially its operation on 1 January 2016.

In this regard, two separate public discussions commenced in mid-October:

• new draft amendments to the Electricity Trading Rules were published on 21 October 2015; and
• drafts of the Operational Rules for Organized Power Exchange and Settlement Rules were published on 15 October 2015.

Currently, Bulgaria and Croatia are the only EU member states which do not have day-ahead power exchange yet. The idea for its implementation was a key milestone in the Bulgarian Energy Strategy 2020, which envisaged the Bulgarian power exchange to become operational by the end of 2011. However, the Energy Exchange was established as an entity under the Bulgarian law much later – in January 2014.

It is a wholly owned subsidiary of the state-owned company Bulgarian Energy Holding EAD (“BEH”), which holds a 10-year license to operate the electricity exchange in Bulgaria. In April 2015, the Energy Exchange signed a Cooperation Agreement with Nord Pool Spot for the day-ahead power exchange platform, using the Pan-European Hybrid Electricity Market Integration Algorithm (Euphemia). At a later stage, the scope of cooperation is to be extended to include an intraday market.

A related proceeding for abuse of dominant position is pending before the European Commission (case AT.39767 - BEH Electricity) against its parent company BEH. According to the European Commission, BEH may have prevented traders from freely deciding where to sell electricity purchased from BEH, in particular, by including territorial restrictions in its production subsidiaries' electricity supply contracts.

To alleviate these concerns, BEH has offered to set up a power exchange in Bulgaria, to offer predetermined volumes of electricity on the day-ahead market on the new exchange for a period of five years and to ensure the independence of the power exchange by transferring its control to the Bulgarian Ministry of Finance. The European Commission is currently market testing BEH’s commitments.

It would be unfortunate if the antitrust proceeding is the only cause for speeding up the implementation of the Energy Exchange. However, we hope the 1 January 2016 deadline for the kick-off of the Bulgarian Energy Exchange to be respected, thus, being a further step towards the liberalization of the Bulgarian energy market.