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27.04.2016
How to keep your interest during liberalization
Contracting challenges for small businesses and households after the implementation of the standardized load profiles
AUTHOR: Atanas Georgiev

The introduction of standardized load profiles for all low voltage electricity consumers in Bulgaria on April 1 set a new milestone for the liberalization of the market. Now households and small businesses have the opportunity to switch their supplier, even if their consumption is not metered with a smart device. There are already many offers from alternative suppliers, who would like to attract new customers, offering different pricing, balancing, and energy management solutions. Households still cannot receive better prices in the liberalized segment of the market, but many small business customers are wondering how to keep their interest during this process and what are the main risks.

Do I know your company?

Every market is built upon mutual trust and confidence among the counterparties. One of the main purposes of market liberalization is to allow the entrance of new market players, who may be able to satisfy the customers’ needs in a better way. However, one of the main risks during the opening of the energy market is related to the trustworthiness of the new energy traders.

The only way to manage this risk is to be well informed. If you receive an offer from an alternative supplier, do some preliminary checks. First, look up for the company’s name in the official register of all licensed electricity traders, which is managed by the Energy and Water Regulatory Commission. The list is far from perfect, as it does not allow sorting, filtering, or other options for easy access to the needed information. However, you can look up with the “find” option in your browser the name of the company who contacted you in the webpage, which has more than 430 records. Compare the name and the corporate form of the trader, read about its license (whether it is only for electricity trading and/or something else as coordinating a balancing group), when did they get it and what is its validity.

If possible, ask for references from other clients of the trader. Word-of-mouth marketing is also a good option, so ask around your business partners and/or friends whether they know the company and what is their opinion on it. Another source of information could be the official Commercial register. There you can see for free the company’s history, its financial data, its ownership and management.

Who will be responsible for the balancing?

The liberalization of the electricity market brings new rights, but also new obligations. When a small company or a household buys electricity under regulated terms, the balancing is included in the bundle price per kilowatt-hour. When the incumbent supplier is replaced by a new one, both the supplier and the customer are responsible for forecasting and observing the hourly consumption. Industrial consumers can do this alone, but usually the traders bundle the balancing service in their kilowatt-hour price.

When smaller business consumers switch to a new supplier, they need to know very well the balancing terms of the new contract, as well as the ability of the energy trader to manage the balancing procedure. Electricity traders have to be registered as coordinators of balancing groups as well, and this list is available on the TSO’s website. Traders could also have a balancing contract with another trader for the balancing activity. In both cases, consumers should find out more about these issues. The contracts may have specific terms, related to the so called “imbalances”. They may lead to additional payments and/or penalties, depending on the provisions of the contracts.

Read what you sign

The clients, who still purchase electricity under regulated prices, do not have an individual contract with the incumbent supplier. Their relations are regulated under the General Terms, approved by the regulatory commission. When this relation is replaced by a contract with a new supplier, the terms may differ substantially. Clients may not be accustomed to reading the General Terms, because they rely, that the regulatory body is doing this. However, in the liberalized market, every sentence of the contract should be put under scrutiny.

Examples from other countries and even from Bulgaria show, that often the contracts may contain clauses for additional payments after a preliminary termination – similar to the contracts of mobile operators. Ask your future supplier what are the contract termination costs and how this process is managed. Also, look for any hidden costs in the “small print”.

Also, there are some cases in the European Union, when customers sign a contract with a company, which claims to be “the official supplier for this region” or even the regulatory body – under the deception that they are just “updating the consumer’s personal data”. Beware of street-vendors and ask for the proper credentials before signing a contract and even before sharing your consumer data.

The regulatory commission and the consumer protection commission are not abandoning the consumers during the process of liberalization. They could be contacted in any case of suspicion or if the customers have an enquiry regarding their rights and obligations. Even so, remember, that the one who can really keep your interest, is you.
 




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