REPORT TO THE CPC ON VIOLATIONS OF FREE ELECTRICITY MARKET

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S I G N A L

FROM

Vasil Velev – Chairman of BULGARIAN INDUSTRIAL CAPITAL ASSOCIATION

Radosvet Radev-President of  BULGARIAN INDUSTRIAL ASSOCIATION – UNION OF THE BULGARIAN BUSINESS 

Tsvetan Simeonov – President of  BULGARIAN COMMERCE AND INDUSTRY 

Cyril Domuschiev – President of the  Confederation of Employers and industrialists  IN BULGARIA 

RE: VIOLATIONS IN ART. 15, 21 AND 22 OF THE LAW ON PROTECTION OF COMPETITION

Ladies and Gentlemen MEMBERS OF THE COMMISSION FOR THE PROTECTION OF COMPETITION, 

This signal approach the Commission for Protection of Competition to investigate the actions of a group of participants in the free electricity market, which we consider his behavior impermissibly violate the principles of freedom of contract and competition enshrined in the Bulgarian legislation.

Our factual statements are based on analysis of publicly available information.

The specific facts and circumstances are as follows:

A significant part of the electricity produced by privately owned facilities in the country, is under direct or indirect control of entities that are related parties within the meaning of §1 of the additional provisions of the Commerce Act. Addresses the following companies:

EİK Electric power, MW
HEATING – BURGAS EAD 102011085  18
DHC Pernik AD 113012360 105
HEATING – PLEVEN EAD 114005624 68.18
HEATING RUSE EAD 117005106 400
HEATING – BT PLC 104003977 2.81
HEATING Vratsa EAD 106006256 6.24
HEATING Sliven EAD 119004654 12.71
HEATING Gabrovo Ltd. 107009273 12
BRIKEL 123526494 200
TPP – Bobov Dol EAD 109513731 630
Maritsa 3 AD 126526421 908

Total installed power of 2362, 94 MW

The electricity produced by the above companies, is sold on the open market electricity company trader “Grand Energy Distribution” associated with the entities – manufacturers. We should highlight the fact that the trader “Grand Energy Distribution” under the agreement represents “Heat Sofia” Ltd. in the sale of electricity produced from cogeneration company with a capacity of 186 MW.

The presence of connectivity between the owners of production facilities and subject – trader on the open market is a concentration which objectively creates conditions for market manipulation.

There are conditions to artificially create electricity shortages by restricting their production and simultaneously buying by traders linked the entire offer of state-owned companies – producers of electricity on the exchange.

Separately, under the control of the owners of production facilities is an insurance company.

The insurance company issuing insurance policies as a form of guarantee security when buying electricity mainly to group vendors associated with the manufacturer, which directly creates competitive advantage. This circumstance suggests that it is possible and purchased power would not be paid and strengthens non-market advantage.

From those circumstances it can be reasonably assumed an unacceptable concentration under the Law on Protection of Competition.

On the other hand – the market behavior of the above players on the electricity market creates doubts about the existence of a cartel in the following areas:

“Grand Energy Distribution,” European Trade off Energy “,” Saga Commodities “,” TM Technology “,” Energy Invest Europe “- all related entities – owners of production facilities, participated in a tender sessions of the Bulgarian independent energy market during the period from November 2018 to January 2019 under which dealt offered by NPP “Kozloduy” amounts of electricity at the rate of about 500 MW.

Each of these traders bought on the basis of a bilateral agreement electricity from the proposed NPP “Kozloduy” and formally in each of the contracts is complied with in the tender documentation for the purchase of quantities of up to 10 MWh, respectively 20 MWh from a buyer.

Practically all the electricity offered during those trading sessions, was purchased by the companies.

Shows a clear trend is an essential part of the electricity sold on the free market to be purchased by listed companies while eliminating other traders.

Our data indicate that subsequently purchased electricity is traded between the above vendors based on bilateral agreements. Redistributed among these merchants amounts of electricity sold to their clients – private entities and public entities under conditions and prices that surround stock market mechanism.

On 19/06/2019, the NEC organized a tender for the sale of 98MVt for the period 01.07-30.09.2019, the foretold that favors only one possible buyer potentially al available hourly amount between 0MVt and 490MVt. Following the intervention of employers’ organizations that infamous auction was canceled, meanwhile NEC organize two tenders for the same day, again with conditions doubtful favoring one potential participant, but also those tenders were canceled. Ultimately NEC held a desired auction on 01.07.2019 and realized electricity potential al available hourly amount between 0MVt and 250MVt, which amount to 80% is bought from two related companies mentioned above. Therefore the trend toward concentration deepened with the active assistance of NEC. We insist to check this auction.

The registration system allows BNEB to check the link between the offered items (quantity and price) on the “day ahead” of the aforementioned related companies and those of the NEC for the period 12.1.2018 14.7.2019 on-on – we have grounds to assume coordination and resulting from the steady high hourly rates.

Deserves attention and study coordinated behavior between those dealers and major exporters of electricity by GEN-I, Danske Commodities, Alpiq over the same period, the 12/01/2018, 07/14/2019, the identifiable as through bilateral agreements between them and by quoted positions (quantity and price) segment “Day ahead”. In this regard should be given to the data for cross system of ESO closed internal transactions between these entities (without physical cross-border transfer) and hourly rates achieved for the period segment “Day Ahead”.

Those facts give clear indications of manipulation of the free market in electricity and the implementation of certain entities of non-market business practices.

A direct consequence of the actions of economically related entities is limiting the ability of other traders on the open electricity market to purchase electricity under clear and competitive conditions.

The described pattern of the above companies disrupt the functioning of the liberalized electricity market. Thus creating conditions for a permanent electricity shortages and distorted price formation. This process directly and negatively affects the functioning of the whole Bulgarian economy.

The severity and scale of the problem motivated us to take any legal action to prevent a deepening of this trend and unlawful practices stopped.

Ladies and gentlemen members of the Commission for Protection of Competition

Please initiated proceedings under the Law on Protection of Competition and ordered a review of the above facts and circumstances, with a view to establishing whether there is a legal hypothesis unacceptable concentration and / or cartel among those listed in the complaint subjects – participants in the free market of electricity.

We express our readiness, if necessary, to provide additional information available.