Bulgarian electricity balancing market prices intransparent – traders

The way the Bulgarian transmission system operator ESO calculates the electricity balancing market prices is not transparent and leads to price anomalies, market participants warned. The TSO said it is strictly following the methodology set by the country’s electricity trading rules, although it has recently asked the energy regulator to make some changes to it.

The Bulgarian balancing market launched on 1 June after several delays over the past few years ( see EDEM 15 May 2014 ).

Electricity traders, producers or suppliers and other companies are either part of balancing groups, with one coordinator responsible for the balance of the whole group, or they can chose to balance their positions on their own.

These groups are in charge of making sure electricity supply and demand is balanced in various parts of the electricity grid as well as trading any shortfalls or surplus.

The new rules for the balancing market were part of the electricity trading legislation that Bulgaria adopted in July 2013 to comply with the EU’s third energy package.

Balancing methodology

According to the trading rules, the TSO calculates the system’s balancing needs for each day and the needed secondary, tertiary or cold reserve to cover those needs. Then it creates a list of sources of balancing electricity which have given their price offers to cover either shortages or surpluses in the system.

The balancing price for shortage for each settlement period is calculated through a formula based on a ratio between all expenses made by the grid operator to buy balancing energy and the net negative imbalances of all balancing groups’ coordinators.

Similarly, the surplus price is a ration between the revenue of the TSO from the sold balancing electricity and the positive net imbalances of all balancing groups’ coordinators.

ESO calculates one average surplus and one average shortage price for the whole month which is then used to set the average prices for the month ahead.

Price spikes

However, the market experienced some extreme prices for July based on the June levels, according to a statement from energy regulator SWERC published in the beginning of August.

For example, the average shortage price for the month of July was Bulgarian Lev (Lv) 444.355/MWh (€227.143/MWh) and the average surplus price stood at Lv -0.965/MWh (€-0.49/MWh). These were calculated as an average between the highest and lowest price for a surplus and for a shortage, according to the statement.

Traders reported that prices had reached Lv1000.00/MWh for certain hours.

ESO pointed out in SWERC’s statement, that such extreme difference between the surplus and shortage price hasn’t been seen on any other balancing market in Europe.

These prices did not reflect the actual system balancing expenses. That is why the TSO asked for a change in the methodology.

The regulator allowed the change which will be applied for the August prices. These will be calculated as an average between all hourly surplus and all hourly shortage prices.

However, it is yet to be seen how the new methodology will impact the market as the August prices will be calculated and published by 10 September, an ESO spokeswoman said in an emailed statement on Thursday.

Intransparency

Traders still insisted that it was unclear how the TSO comes up with the prices. They noted that there is no available information about which power plant is providing balancing electricity at any given time. Furthermore, hourly prices are published in the system with one week delay and only the balancing groups’ coordinators have access to them.

“Participants are totally in the dark,” one of market source remarked.

“We need to guess which power plant may have provided the balancing electricity, depending on the price [for each hour],” another one added.

ESO was expected to start making balancing prices publicly available from July ( see EDEM 13 June 2014 ).

“The publishing of information about the available secondary and tertiary reserves would be possible only if the suppliers of balancing electricity gave their consent. They haven’t done so,” the ESO spokeswoman said.

This type of data is being treated as confidential business information according to the Bulgarian legislation, she added. Irina Peltegova