The Electricity Acts accepted in 2001 (CX) and in 2007 (LXXXVI) and the new legal regulations put in force based on those (governmental decrees, the decrees of the respective supervisory ministry) and the grid code (operation and commercial code) prescribed by the Act and elaborated by the system operator created the legal conditions for the liberalisation of electricity trade. The liberalisation itself has been ordered by the directives of the European Union as a condition to access the European Union by Hungary: hoping that competition and an opportunity for choice make electricity prices lower. On the electricity market – opened since January 1, 2003 – more and more consumers have become eligible, i.e. had the opportunity to chose where to buy electricity from. The eligible customers may create their own balance circle or are obliged to affiliate to a trader’s balance circle. The balance circle is a group of generators, marketers and consumers in which the planned volume of purchases and sales correspond. These volumes, defined for every quarter of an hour (schedule), are given by the balance circles to the transmission system operator (TSO). If the balance circle differs from its schedule – the actual consumption is higher or smaller than planned – the difference is balanced by the TSO and the balancing energy is settled later with the balance circle. (The description of balance circle system and of the price setting of balancing energy can be found in the Commercial Code in Hungarian.)
The tarification structure of electricity has also changed with the market opening. Every market player may access the networks under equal conditions and freely, the use of networks has separated from trade. The transmission system operation has also separated from trade. It provides system services for every player: ensures the quality of electricity (frequency, voltage), covers the network losses, ensures the power reserves and balancing energy, guarantees the operation control of the system and prepares for troubleshooting severe disturbances as well as decreasing the resulting consequences. The transmission system operator is entitled to receive a transmission system operation fee for these services. Since these activities are so called natural monopolies, theirs tariffs should be regulated. The setting of these prices is one of the tasks of the Hungarian regulatory authority, the Hungarian Energy Office.
Generators, marketers and eligible consumers are the players on the free market. The law gives an opportunity to leave the marketer out of the chain and the power plant (local or foreigner) may directly agree with the eligible consumers. The sale and the purchase prices are subject of a free agreement. Responsibilities and obligations are fixed in contracts on the free market.
The law ensures that it guarantees the supply of consumers who are themselves not able to step out to the free market. It appoints so called Universal Suppliers with the obligation of electrical energy supply and contracting obligations. In case of economic or financial wreckage of the universal supplier the Hungarian Energy Office may appoint a Last Resort.
The Hungarian Electricity Act ensures the support of renewable generation, too. Therefore it prescribed the system of obligatory takeover of their generation (KÁT). For this task it appointed the TSO, who has set up the KÁT balance circle. The members of this KÁT balance circle are the KÁT generators. The generation of this balance circle will be allocated among the other balance circles in the ratio of their consumption.
The goal of the European Commission is the creation of the single Internal Electricity Market (IEM). For this purpose it urges the increase of the volume of cross border electricity trade for the extension of the market. To decrease the existing congestions on the state borders, provisions have been taken, but in the mean time distribution of the congested cross border capacities shall be made by the system operators on market based mechanisms, as far as possible by a common regionally coordinated procedure.
For the facilitation electricity trade the law created the possibility to establish the organised electricity market, also known as power exchange. Therefore MAVIR ZRt. has established its affiliate company named HUPX. The power exchange gives market participants the possibility to give their bids and offers on a single platform, hereby optimizing their transactions. (About the operation of the power exchange see our separate explanation).