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Market Players, Contracts

Players of the electric energy market

The route of electric energy from producer to consumer is the same on the liberalized market as before, since it invariably reaches the consumers on the same grid, only the intermediate players differ.

According to previous regulations, electric energy could be purchased from the producers exclusively by the wholesaler (Hungarian Power Companies Zrt. (MVM)), who could sell it to authorized distribution network operators, who then forwarded it to consumers.

With the liberalization of the market, however, retailers (that is, companies with an electric energy trading license) can now purchase electricity directly from the producers just like the wholesaler (still MVM), but they can invariably purchase the energy required to supply consumers from the wholesaler if they like. Consumers, in turn, liberated from the dependency on the public utility’s regional monopoly as supplier, are free to select their retailer of choice.

The players of the electric energy market are therefore substantially the same as before:
  • producers (power plants) 
  • wholesaler, MVM in Hungary 
  • retailers, that is, suppliers and companies with an electricity trading license, and 
  • consumers, grouped into two basic categories: 
    • open market consumers, who are large consumers (factories, plants and big companies) and medium-sized consumers (business consumers and medium-sized companies) with a nominal connection capacity exceeding 3x50 A (3x63 A as of 1 January, 2009), with an obligation to purchase electricity in the open market, and 
    • universal consumers, who do not belong to the previous group, including small consumers (small businesses) still enjoying protected and state controlled market conditions, and household clients, who can purchase electricity at prices and under conditions controlled by the state from their earlier regional electricity supplier, or more accurately from its successor with a universal service provider’s license.
Contracts

In the following we provide a detailed description of the three types of contract that have to be concluded in the framework of the liberalized market: the network connection, network use and distribution agreements.

Network connection agreement

This agreement establishes legal relations between the regional authorized network operator and the consumer, registering the location (lot number and postal address) of the given network connection point, its basic technical parameters (voltage level), the available capacity (which represents asset value), and of course providing that the consumer has the power of decision concerning the connection point in question.

Network use agreement

This is the agreement on the basis of which the authorized network operator - in accordance with respective regulations - transmits electricity to the connection point of consumers (network users) with valid network connection and distribution agreements, and this agreement serves as the basis of billing grid access fees in return for using the service. The consumer has to sign a network use agreement with the regional authorized network operator for each connection point.

Distribution agreement

Competitive market distribution agreements are in all cases the result of negotiations between retailer and consumer, and can be grouped into two basic categories:

  • Supply based contracts
    Competitive market consumers need to have only one supply based contract, as with this type of agreement the electricity retailer provides the necessary amount of electricity to the consumer even in case of divergence from the schedule. 
  • Schedule based contracts
    With schedule based contracts, the electricity retailer only provides the amount of electric energy fixed in the schedule. In this case consumers can have any number of schedule based contracts or a combination of schedule based contracts and partial supply based contracts, covering their entire electricity demand.

More on distribution agreements...

Supply based contracts
  • Full supply based contract with a tolerance band for consumption volume
    Selecting this contract plan consumers obtain the entire quantity of electricity they need from the retailer, regardless of the timing and duration of the demand, and without scheduling obligation.
    When is it advisable to select this plan? When consumers are unable to estimate the accurate timing and development of their electricity consumption, but they wish to satisfy their entire electricity demand through a single partner, in the simplest possible way, with minimal risk and at competitive prices.
    Further details... 
  • Full supply based contract with a tolerance band for capacity
    Selecting this contract plan consumers obtain the entire quantity of electricity they need from the retailer, preparing a schedule on a 15-minute basis, which reduces the risks of acquisition, thus allowing for an even more favourable contract price. This contract plan involves a so-called tolerance band, within the bounds of which the user’s actual electricity consumption may diverge from the schedule.
    It is advisable to select this contract plan if the consumers are able to accurately plan their expected electricity consumption and its schedule, and endeavour to achieve the most favourable price while receiving full supply.
    Further details... 
  • Partial supply based contract
    The partial supply based contract plan is advisable in case consumers already have part of their energy demand covered in the scope of their schedule contract, but need a solution for satisfying remaining energy demands.
    With this contract plan, as with full supply based plans, financial settlement of accounts is based on the actually metered energy consumption, from which the schedule data of schedule based contract(s) have to be deducted.
    Further details...
Schedule based contract
  • With the schedule based contract, the retailer undertakes to supply electric energy accurately as established in the schedule provided by the user - for the most favourable pricing in its product portfolio.
    It is advisable to select this contract plan if consumers are able to accurately plan part of their electricity consumption and would like to exploit the price advantage based on accurate predictability, as opposed to supply type contracts, or if they have their own balance group and thus only conclude schedule-based contracts. In this case the user’s only task is providing a schedule on a 15-minute basis. Further details...