All producers will pay to ESO for access to the grid

EWRC Decision C-19 dated 1 July 2019 introduced substantial changes in the price of access to the power transmission network thereby broadening the range of liable network users, and introducing three different levels of access price depending on network costs associated with the respective category of users.

This Decision of the Regulator is in line with the provisions of Article 104, para 2 of the Energy Act in force since 1 July 2019, stipulating that ‘prices of access and/or transmission shall be owed by electricity producers…’.

Prices of access to the power transmission network are calculated under the provisions of Article 26, para 1 of the Ordinance on regulating electricity prices ‘on the grounds of approved estimated necessary annual revenues… and approved estimated quantity of electricity for sale in the territory of the country and for export…’.

Changes relevant to producers

Up to the end of June 2018, solar and wind power producers were eligible to access the network for a price of BGN 3.02/MWh. All other producers were granted access for free. The new regulatory period (1 July 2019-30 June 2020), kicked off with a new requirement: all producers using the network would be required to pay an access price amounting to BGN 2.12/MWh while the so-called dynamically changing power generation, i.e. power generation that was hard to predict due to energy resource specificity (sun and wind), would pay a higher access price of BGN 5.14/MWh.

These prices will secure revenues to ESO necessary to ensure power system reliability in the amount of BGN 97.1 million. The latter includes BGN 15 million from producers of dynamically changing power generation and BGN 82.1 million from other producers.

Future access price proceeds will be used by ESO to purchase cold reserve availability, about BGN 57.0 million, to cover costs of reserve services, about BGN 17.5 million, and to provide additional reserve because of RES, close to BGN 8.8 million. With the remaining BGN 13.8 million ESO will cover ½ of its conditionally constant system management costs (plus the respective return).

Congratulations to final customers!

The change in the access tariff structure transfers much of the previous financial burden from final customers to producers. Access price for final customers goes down from BGN 1.39/MWh to BGN 0.41/MWh or over 70%!

The obvious reason is the increased number of network users having an obligation to pay for the right of access. However, more important here is yet another factor that contributes to this dramatic price drop, namely, the way EWRC has evaluated final costs arising from final customers, respectively, the necessary revenues they need to secure for ESO. According to EWRC these revenues amount to BGN 13.8 million which in fact represent ½ of ESO conditionally constant system management costs (plus the respective return) and do not include costs associated with the purchase of cold reserve availability and provision of additional services.

With the prices approved, it is expected that final customers will generate 12% and producers – 88% of ESO revenues earned from granting access to the grid.

EWRC Decision C-19 dated 1 July 2019 shapes ESO revenue structure in the following manner (from access to the system, broken down by source and by designation):

Objections to changes

Changes are challenged mostly by producers. The essential objections come down to the following:

Introducing three access prices allows for unequal treatment of final customers and producers, on the one hand, and on the other, solar and wind power producers and all other producers;
The Regulator has failed to provide reasons why all costs of cold reserve and additional services are redirected from final customers to producers;
Access price introduced for producers quite surprisingly breaches the price framework, contracts concluded and increases their financial risk;
There is no rationale behind the pricing elements that determine access price parameters;
It is suspected that the new access price grants ESO a double payment for balancing the system;
The absence of a mechanism for cost distribution between access and transmission prices in Ordinance 1 on regulating electricity prices, dated 14 March 2017, allows the Regulator to transfer costs from one price to the other without an adequate substantiation.

Details on objections and EWRC responses thereto may be found in the link provided to the Decision on prices cited.