Bulgaria Market Briefing 2007
London Economics, October 2007
The market briefing is intended to provide both a thorough overview of each country’s electricity sector, while also allowing the reader to quickly identify the information needed. The market briefings are standardized as much as possible with this purpose in mind.
That said, availability of accurate and consistent data for all aspects of the electricity sector is not uniform and thus there may be slight differences among the countries. These two pages are intended to highlight what information is included in the market briefing and to provide any details on or guidance to the information that we have aggregated.
The new Energy Act, effective March 2004, radically changed the
rules for energy market participants established by the earlier Energy Act of 1999, which created the State Energy Regulatory Commission (SERC) that same year
- As of February 2005 SERC became the State Energy and Water Regulatory Commission (SEWRC)
- The current market structure, based on a Single Buyer model, was established in 2000, when NEK, the former integrated power monopoly, was unbundled into 6 generation, 7 distribution companies, and one national transmission company
(NEK serves as a Single Buyer)
- The new market structure (commenced in 2004) is a combination of a competitive market based on bilateral contracts and a regulated market, where NEK remains the intermediary for procuring power for captive customers
- The state has reduced its share of the generation market to approximately two thirds.
GENERATION
State-owned NEK essentially controls almost all hydropower plants in Bulgaria as well as Maritsa East 3 coal plant. The state also owns other thermal generators and Kozloduy nuclear plant. The remaining capacity is owned by municipal plants and IPPs
- Many thermal plants have been in operation since the 1950s and over 80% of thermal installed capacity is older than 20 years
- Kozloduy Units 3 and 4 closed on January 1, 2007; Units 5 and 6 remain operational
- State is aggressively privatizing generation
- Historically has been a net exporter; with closure of two nuclear units at beginning of 2007, new generation is required to regain export levels
- Bulgaria is highly dependent on gas and oil imports from Russia
- 3,600 MW of net capacity additions are expected by 2014
TRANSMISSION & MARKET OPERATION
- NEK EAD is the transmission system owner and operator, 100% owned by the state; no privatization planned
- The transmission network is 14, 610 kilometers long
- Regulated third party access
- Well developed transmission system with over 14,000 km of lines
- Introduction of a revenue cap tariff regime from 2004
- Prior to retirement of two Kozloduy nuclear units, Bulgaria was a major exporter of power to Turkey, Greece, Serbia, Montenegro, Macedonia, and Albania; a regional energy market is being contemplated for South Eastern Europe
- NEK fulfills the role of system operator
- Under the new energy market, a market intermediary will be set up to handle balancing market
- Implementation of the new market structure is complicated by the existence of long-term power purchase agreements (between NEK, as the Single Buyer, and generators) and power supply agreements (between the Single Buyer and the distribution
companies)
DISTRIBUTION & SUPPLY
- Bulgarian Privatization Agency has divided the country’s 7 distributors in 3
packages: West Bulgaria with 3 firms, Southeast Bulgaria and Northeast Bulgaria, each with 2 firms, for privatization of a 67% stake in each. Under the sell-off strategy, a bidder could acquire only one of the 3 packages
- The total amount of May 2004 bids (more than 11 billion) exceeded expectations. Winners were E.On, CEZ, and EVN (Austria), who now collectively own 7 discos.
- Under the new market design, retail and distribution functions will be separated
- The distribution networks are in poor condition with losses of over 20%
- 8 regional distribution/supply licensee companies
- Regulated wholesale, end-user prices
- Regulated third party access possibilities for eligible customers: bilateral contracts, balancing market
- Deregulated prices for ancillary services
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