Integration of the jointly developed with IBM Bulgaria and IBS Bulgaria analytical model based on AI enhances significantly monitoring, detection and reporting on market manipulations

Starting in 2024, the Energy and Water Regulatory Commission will start using the specialized software model for analysing the wholesale energy market. Integration of this model into Monitoring and control of the implementation of Regulation № 1227/2011 (REMIT) Division’s operations will improve significantly monitoring, analysis, detection and reporting on market manipulations. The software package has been developed jointly involving a team from IBM Bulgaria, their partner IBS Bulgaria and REMIT Division.

Currently, there is no regulatory body in the EU that has developed a similar based on AI analytical model or tool to detect suspicious transactions that have the characteristics of market manipulation in energy markets.

On this occasion, an Agreement was signed on 7 December 2023, between IBS Bulgaria and the Energy and Water Regulatory Commission, wherein the energy regulator acquires free of charge the specialized software model. The agreement was signed by Associate Professor Ivan Ivanov, Chairman of the Energy Regulatory Commission, and Mr. Goran Angelov, Executive Director of IBS-BULGARIA EOOD. The ceremony was attended by EWRC members, representatives from IBS-Bulgaria and IBM Bulgaria, EWRC Secretary General, and officials from the REMIT Division and Natural Gas Division.

“The innovative software model, a product of EWRC ongoing commitment to integrating new technological solutions into regulatory activities related to electricity and gas market analysis and monitoring, was highlighted by EWRC Chairman Assoc. Prof. Ivan Ivanov during the ceremony. He emphasized that starting from July 1, 2024 the electricity market will be fully liberalized in Bulgaria and the quantities traded on the energy exchange are expected to experience a significant surge. In that situation, the model will significantly enhance the speed and efficiency of investigations of potential abuses by market participants”. Chairman Ivanov also noted that the Agency for the Cooperation of Energy Regulators in Europe (ACER) has appreciated EWRC efforts to develop the new technological product.

“Over the past year and a half, the team of IBS Bulgaria and REMIT Division has invested great efforts to achieve the necessary result. We believe that the developed software model is a very good basis for EWRC to make a significant leap in its activities in energy market investigations”, said Mr. Goran Angelov, Executive Director of IBS–Bulgaria EOOD.

Details about the specialised software model for energy market analysis:

The specialized software model fulfils EWRC and specifically the REMIT Division requirements, by enabling their activities to be informed by signals from professional transactions or market participants, as well as observations and analysis of real data from natural gas and electricity trading exchanges. The adoption of the new energy market analysis model becomes imperative due to the substantial increase in the volume of trades in wholesale electricity and gas markets and the growing number of market participants since 2022.

The developed model for monitoring and analyzing energy market manipulation adheres to the rules and guidelines of the Agency for the Cooperation of Energy Regulators (ACER) using a rule-based approach. Real historical data concerning standard energy supply contracts have been used to detect predefined manipulation of wholesale energy markets (both electricity and gas).

So far, the Commission has ruled three REMIT decisions imposing financial sanctions on energy companies for established manipulations at the wholesale energy market in accordance of Regulation (EU) No 1227/2011. A total of nine trading companies faced financial penalties, amounting to over BGN 3.5 million.

By using specialized analytical tools, the deployment of the software model with its capabilities significantly reduces the existing barriers to identifying new instances of market manipulation and greatly enhances the analysis. This would expedite the process of identifying, validating, analyzing, and penalizing instances of market manipulation by energy market participants, ensuring its integrity and transparency.