Dear Madam Minister,
Dear Chairman (of the regulator),
Distinguished participants and guests:
Thank you for inviting me and the World Bank to attend this event and to contribute to the discussion of Bulgaria’s energy sector reform. While I am not an energy expert, I represent an international institution that is strongly committed to two important features of this reform:
- First, we believe, and our analytical work confirms, that this is a crucially important sector for the economy and it is essential that it is brought back onto a stable and sustainable financial footing. Transitioning to a competitive market model is the way to ensure that the benefits of reliable and affordable electricity can translate into higher economic growth and shared prosperity.
- Second, it is the World Bank mandate to work for the elimination of poverty and to protect the vulnerable. As the Minister mentioned earlier, it will be particularly important to ensure that the most vulnerable people in Bulgaria can afford electricity supplies.
In this context, the Bulgarian government has a clear plan for moving forward and is taking specific measures to achieve these two goals - transitioning to a competitive market and ensuring protection of the vulnerable people. We are happy to have the opportunity to support the government and to work with other partners to realize the goal of liberalization of the power market.
While our analysis and our recommendations are still to be finalized, let me mention three aspects that I believe are important elements of the reform program.
The first element has to do with the transition to a competitive electricity market. As part of the transition it would be mandatory for State Owned generators to participate fully in the exchange. The State would lead by the example and make all State-Owned Enterprises participate in IBEX for 100% of their output. They would be able to choose which window is best suited for them (i.e. long-term OTC, day ahead, intraday window) in order to optimize their portfolio.
In addition to bringing much needed liquidity to the market, we believe it will contribute to greater transparency and will help to address some of the long standing concerns of governance in the sector.
Such a transition could start immediately (or as soon as IBEX has its platform for bilateral contracts in place). It may take up to one year for all output to be offered through IBEX. This would be adequate to create the space and the time for generators to learn and adapt to the new market circumstances.