site.btaBulgaria Contracts Large Foreign Operator to Organize its Electricity Exchange - Regulator's Head

Bulgaria Contracts Large Foreign Operator to Organize its Electricity Exchange - Regulator's Head

Sofia, April 22 (BTA) - Probably as soon as next week, Bulgaria
will contract a large foreign operator to organize its energy
exchange, the chairman of the Energy and Water Regulatory
Commission, Ivan Ivanov, said in a BTA interview Wednesday. "The
 choice of such a contractor will make sure the energy exchange
will function in keeping with the EU rules," Ivanov commented.

He added that the contractor is based in a country which has the
 lowest rate of corruption in the EU and the world. He would not
 name the company or the country.
   
Electricity consumers should have access to the electricity
exchange late this year or early next year, and this is unlikely
 to bring about an increase in electricity prices - at least not
 dramatic increase, Ivanov said.

He explained that household users will not be able to choose a
producer - electricity producers are not expected to sell
directly to household users - but they will have the right to
pick their electricity trader. Such traders will know the
consumption patterns and will be able to ensure a pool of users
where consumption will be balanced and sustained during a
24-hour period. At a later stage, smart networks will be set in
place to further optimize consumption.

Asked whether the start of the electricity exchange will make
the export of Bulgarian electricity unprofitable, Ivanov said
that it all depends on the price of the electricity offered for
export. "If all surcharges are added to the price, in all
likelihood the electricity will be incompetitive. A balance will
 be sought," he added.

Last year when the rules for trade in electricity were adopted,
they catered to the interests of one market player - the
National Electricity Company (NEK) - rather than being equally
advantageous for everyone, said the regulator's chief. Now, even
 NEK agrees that these rules need to change. "I believe that
before the start of the next regulatory period on July 1, the
competent working group should be ready with specific
proposals," he said.

Before this happens, NEK should deal with its deficit and the
energy regulator will do its best to see this happen without
having to raise the price of electricity for the public.

Ivanov could not attach a specific figure to the NEK deficit and
 said it will be clear at the end of the year. Last year it was
644 million leva.

NEK is expected to cut back the deficit by 100 million leva as a
 result of the introduction of caps on purchase of green energy.
 Another 240 million leva of the deficit will be slashed thanks
to proceeds from the sale of green energy quotas and a further
97 million leva from a recent agreement with two US-owned power
plants for reducing the capacity availability price, said
Ivanov.

Asked how NEK will find money to pay its debts to the two power
plants - which it has vowed to do in exchange for the power
plants' commitment to lower the capacity availability prices -
Ivanov said that NEK, through the Bulgarian Energy Holding, will
 seek a loan to repay its old debts or else the debt will be
claimed in court.

NEK will also cut back its spending by reducing the electricity
it is required to purchase from in-house power plants and
heating utilities - but it is early days to quantify this
precisely.

Costs will be further optimized by holding transparent tenders,
Ivanov added. "Last year some 30 million leva was wasted because
 the previous NEK director contracted directly, without
competition, the sale of the electricity output of water power
plants. Now the electricity from water power plants for next
year is to be auctioned off."

Ivanov was adamant that there is no reason to expect electricity
 production in Bulgaria to increase. "Quite the opposite.
Especially with the gradual broadening of the use of natural gas
 which is expected as a result of the diversification of gas
supplies and the liberalization of the natural gas market, I
believe that Bulgaria will make up the significant delay in the
gasification of household users which now stands at a mere 2-3
per cent."

It also transpired from Ivanov's remarks that three companies
which were contracted to do prospecting for natural gas in the
off-shore bloc of Khan Asparouh, are planning to go ahead with
deep-water vertical drills early next year and the results from
the prospecting is due before the end of 2017. In 2018 an
application is expected for industrial production of natural gas
 in the Black Sea, said Ivanov.

In the water sector, two new ordinances are due for adoption: on
 the quality and on the price of water, and these are expected
to bring down the price charged by some water companies, said
the regulator's chief. He added that the Sofia water company is
not among them.

"Additional aid is available from the European Commission for
restructuring water companies and I hope that over the next 10
years, due to investment, the loss of water along the water
supply network will drop significantly," he said adding that at
some places water losses reach 55-60  per cent.