site.btaNew Caps on Revenues of Electricity Producers Are Preventive Move to Protect Economy

The Government Wednesday set lower ceilings for electricity prices over which power plants will have to pay contributions in the Energy System Security Fund to finance measures for compensating producers for the high price of electricity.

The ceilings were set at:

BGN 150/MWh for the Kozloduy N-plant;
BGN 300/MWh for conventional coal-fired coal plants (multiplied by a factor of 1.32 to adjust to the cost for CO2 emissions);
BGN 300/MWh for conventional coal-fired coal plants that add biomass and/or refuse, oil products or a combination thereof (multiplied by a factor of 0.9 to adjust to the cost for CO2 emissions); 
BGN 200/MWh for the National Electricity Company which owns water power plants;
BGN 300/MWh for producers of electricity from renewable energy sources.

The reduction of the cap on revenues of electricity producers is aimed at collecting funds in the Energy System Security Fund. This is what the Ministry of Energy (MoE) replied on Thursday to BTA regarding the decision of the Council of Ministers on Wednesday, in which the government set the values that serve to calculate the market revenue ceiling of electricity producers. BTA sought comments from the Energy Ministry, which proposed this decision, as well as from the parties concerned.

The Ministry of Energy commented that the funds were intended to capitalize the Energy System Security Fund. The financial resources collected will be used to deal with the consequences of possible high energy prices. The fund compensates businesses and residential consumers. According to the Energy Ministry, the decision will not harm the state-owned Kozloduy Nuclear Power Plant (NPP) and the National Electricity Company (NEC) because the changed ceilings are closer to the real ones. "The new levels have been set after careful and expert analysis so that no one will be harmed, and investment intentions will not be compromised in any way," the Energy Ministry said.

The release points out that in case of a harsh autumn or winter, with increased energy prices - in particular natural gas, Bulgaria could find itself again in a crisis situation where the Energy System Security Fund is not well capitalized. They add that this is a pre-emptive move to prevent possible negative consequences for the whole economy.

The decision of the Council of Ministers states that the National Electric Company (NEC), as a producer of electricity from hydroelectric power plants (HPPs), will calculate its cap on market revenues at BGN 200 per megawatt hour (MWh). NEC told BTA that the revenue ceiling from hydropower plants was BGN 350 per MWh until June 30 this year. The company added that NEC's hydropower generation serves to cover the consumption of domestic customers, to regulate the electricity system, and to sell on the free market. Selling the power on the free market is the last priority, and it is also highly dependent on the water reserves in the dams operated by the company. The contribution the company makes to the Energy System Security Fund above the revenue ceiling is also a consequence of the prices achieved on the Bulgarian Independent Power System. "All of these factors do not allow for an accurate assessment at this time of how the revenue cap from the hydropower plant will affect NEC," the company said.

The government decision also says that renewable energy producers without a premium compensation contract will set their market revenue ceiling at 300 BGN/MWh. Chairman of Solar Academy Bulgaria Veselin Todorov pointed out to BTA that this ceiling used to be 350 BGN/MWh. According to him, against the backdrop of investments in renewable energy and expensive technologies, this difference of BGN 50 is significant. He was adamant that the BGN 300 per megawatt-hour which the government currently sets as a ceiling is not enough.