Bulgaria reduces electricity export tariff from 1 August

Bulgaria’s electricity export tariff has been reduced by almost 64% effective from 1 August, according to official documents published by the state energy regulator DKER on Tuesday.

The tariff will total Bulgarian lev (Lv) 12.47/MWh (€6.37/MWh), down from the €17.52/MWh level, which came into force last July (see EDEM 29 June 2012).

The initial proposal foresaw the tariff decreasing to €6.20/MWh and was expected to be announced on Monday (see EDEM 29 July 2013).

Traders welcomed the news, saying that it was about time for the decision to be announced.

The tariff previously comprised five components, three of which have now been scrapped:

green energy fee of €5.68/MWh, now scrapped,

non-recoverable expenses fee of €1.73/MWh, now scrapped,

fee for high-effective combined production of €1.96/MWh, also scrapped,

fee for transmission through state-owned utility NEK’s system, originally €4.84/MWh but now increased to €4.96/MWh, an increase of €0.12/MWh,

fee for access to transmission system operator ESO’s system of €3.31, reduced to €1.41/MWh, a reduction of €1.90/MWh.

The changes were made after the regulator officially introduced a new price methodology.

System deficit concerns

However, traders polled by ICIS on Tuesday were concerned that this methodology only reduced the export tariff by cutting revenues to the distributors, producers, the public provider and the transmission system operator (TSO). This was an artificial reduction to the export tariff, as well as the end-user tariffs, and would create deficits.

EVN Bulgaria, which distributes and supplies electricity to southeastern Bulgaria, expressed concern that it was unclear how the difference between the real system expenses and the revenues set by DKER in its new methodology would be covered. “Such difference puts a serious risk onto the whole sector,” EVN Bulgaria said in a statement on Tuesday, adding that the company will be recalculating its investments for the new regulatory period.

One Bulgarian source noted that theoretically, Bulgarian producers would have a chance to compensate for the cuts by selling more on the free market for export, although he did not expect the new price mix to remain in place for long.

Another source agreed, warning that after recent law amendments DKER has the right to change the new tariffs at any given time (see EDEM 28 February 2013).

Market impact

The new export tariff should make Bulgarian-produced energy competitive again and boost exports from the country, which traders expected to have a bearish impact on regional prices, with more energy available.

ICIS assessed the Bulgarian front-month Baseload export price at €52.02/MWh on Thursday, at a €10.45/MWh premium to its indicative Romanian equivalent, and €13.52/MWh more expensive than Greece. With the export fee falling to €6.37/MWh, exports to Romania would theoretically have become possible on that day, and exports to Greece could also become more likely.

The Hungarian market as the most liquid in the region was assessed at €42.70/MWh on Thursday, encouraging exports to that market as well.

At tenders last week, some Bulgarian producers have sold August Baseload at prices around €34.50/MWh, Peakload at around €42.00/MWh and the high tariff between €40.00-41.50/MWh. However, only limited quantities were sold, as the tenders took place before the new export tariff was official.

Export tariff issues

Traders have previously expressed concern that the high export tariff limited export possibilities for Bulgarian-generated energy.

In February, the Bulgarian electricity traders association ATEB calculated that Bulgarian generators lost out on €153m worth of potential revenues from the drop in electricity exports in 2012 because of export tariffs (see EDEM 14 February 2013).

An electricity oversupply in the Balkans in the first half of this year pushed regional prices down, making Bulgarian energy uncompetitive when the old export tariff of €17.52/MWh was included in the price. In addition, low internal demand and increased production of renewable electricity has led to serious imbalances in Bulgaria’s system, forcing grid operator ESO to restrict generation in some power plants (see EDEM 7 June 2013).

Traders have previously said that scrapping or at least decreasing the export tariff would boost exports and solve the problem with system imbalances.

Bulgaria has been working on ways to scrap the export tariff since nationwide protests over high electricity bills led to governmental resignation (see EDEM 5 April 2013). Irina Peltegova