Czech CEZ will lose Bulgarian distribution licence – PM

Written by on February 19, 2013 in Bulgaria, Business, News - No comments

Bulgarian Prime Minister Boiko Borissov said on February 19 that Czech energy firm CEZ will lose its electricity distribution licence in Bulgaria by the end of the day. The company’s Bulgarian subsidiaries service the west of the country, including capital city Sofia.

But he has rejected calls, heard in recent days from the opposition parties, to nationalise Bulgaria’s three privately-owned electricity distribution companies. Doing so would require refunding all the money spent by the companies in Bulgaria, a cost that was too prohibitive, Borissov said. Instead, the Cabinet would try to renegotiate some of the terms of contracts, where that was possible.

Borissov said that the electricity prices were entirely the domain of the State Energy and Water Regulatory Commission (SEWRC), but the Government would ask the regulator to reduce prices by an average eight per cent starting March 1. This would cancel part of the 13 per cent hike implemented in July 2012.

Borissov’s announcement came only an hour after the Supreme Administrative Prosecution asked SEWRC to revoke CEZ’s licence. The reason for the revocation is that CEZ failed to implement monthly electricity meter measurements – in October 2008, the regulator abolished quarterly measurements, which CEZ had lobbied for.

An investigation by prosecutors, covering the past 13 months, found that CEZ routinely took measurements at longer intervals of time, which was the main reason for the high electricity bills that have sparked nationwide protests against the electricity distribution companies, now in their second week.

Borissov blamed private subcontractors, who carry out measurements on behalf of the electricity distribution companies, for the discrepancies in the electricity bills, saying that while the final sums might tally up, some customers were asked to pay higher prices than their neighbours. The solution was to pursue class-action lawsuits, he said.

Bulgaria’s other two private electricity distributors – Austria’s EVN, which services southern and southeastern Bulgaria, as well as Czech Energo Pro, which bought E.ON’s business in northern and northeastern Bulgaria last year – were also in breach of regulations, but prosecutors did not recommend that their licences be revoked as well.

SEWRC also found that CEZ failed to maintain the required power grid tension in some of the areas serviced by the company, according to reports in Bulgarian media.

In case an electricity distribution company loses its licence – the decision must be made by SEWRC – existing regulations require authorities to appoint a company that will provide the service in the meantime, Economy and Energy Minister Delyan Dobrev said earlier.

Over the past several days, SEWRC has fined both CEZ and EVN for breach of licence terms, with investigations ongoing and more fines possible, the regulator’s interim chairperson Yuliana Ivanova said, as quoted by news website Mediapool.bg.

CEZ and EVN both published their privatisation contracts, signed in 2004. CEZ said in a statement on February 18 that its contract has been available on its website since 2005.

The company said that it was one of Bulgaria’s largest corporate taxpayers and investors, having poured more than 1.7 billion leva in investment alone, more than a third of that amount going into upgrading the power grid and improving service.

In a statement on February 19, CEZ spokesperson Barbora Pulpanova said that the company had fulfilled all its legal obligations and rejected “wrongdoing that could theoretically lead to the starting of a procedure for revoking our license.”

Pulpanova said that Borissov’s announcement was in violation of Bulgarian laws, because SEWRC was the only authority that could initiate the licence revocation process and CEZ had not been notified by the regulation that it intended to do so.

On February 19, EVN said that it paid 1.1 billion leva to the Bulgarian state in taxes and the cost of acquiring its Bulgarian units. Another 1.1 billion leva were spent on energy infrastructure, customer service and efficiency, the company said.

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Alex Bivol is the news editor of The Sofia Globe.