Bulgarian regulator lodges EC complaint against US-owned power plants

Written by on June 25, 2014 in Business - Comments Off on Bulgarian regulator lodges EC complaint against US-owned power plants

Bulgaria’s State Energy and Water Regulatory Commission (SEWRC) has lodged official complaints with the European Commission against two thermal power plants owned by US private investors and renewable energy producers, the regulator’s head Boyan Boev said on June 25.

SEWRC claims that the fixed electricity purchase price in the contracts with AES Gulubovo, owned by US energy firm AES and also sometimes referred to AES Maritsa Iztok 1, and ContourGlobal Maritsa Iztok 3, owned by US-based firm ContourGlobal, represent illegal state aid.

The second complaint, lodged against renewable energy producers, claims that the feed-in tariff paid by the government represents disproportionate state aid.

A favourable decision by the EC would provide a welcome breath of fresh air for Bulgaria’s state-owned utility NEK, whose cash flow has been negatively impacted by the high electricity purchase prices.

Boev told reporters that SEWRC would be force to update NEK’s electricity prices every quarter to reflect additional expenses if the utility’s purchase prices are not cut.

Last month, the regulator asked NEK to begin talks with two coal-powered plants to renegotiate the terms of their long-term electricity purchase contracts, which expire in June 2026.

Bulgaria signed the 25-year contract with the two power plants in June 2001 as an investment incentive with AES and US firm Entergy (which sold its majority stake in Maritsa Iztok 3 to Italy’s Enel in 2003, which in turn sold the plant to ContourGlobal in 2011), which took on the costs of modernising the power plants.

(Although increasingly often blamed for the high price of electricity in Bulgaria in recent years, the contracts are reportedly iron-clad, giving NEK little to no leverage to negotiate a lower price.)

SEWRC said that NEK should target a 30 per cent reduction in the price of electricity bought from AES Gulubovo and a 20 per cent cut in the price of electricity bought from ContourGlobal Maritsa Iztok 3. NEK should also ask to reduce the amount of electricity it buys from the power plants in half.

The “positive effect” from such changes, SEWRC said, would be 5.4 billion leva (about 2.76 billion euro) – meaning that the two power plants would be asked to forego that much revenue over the remaining duration of the contract. In the short term, NEK would save 424 million leva between July 2014 and June 2015.

At the same time, the regulator has also asked the Economy Ministry to table amendments to the Renewable Energy Act that would allow the regulator to set annual caps on the amounts of electricity that NEK has to buy from renewable energy producers using the generous state feed-in tariff.

According to SEWRC’s calculations, halving the amount of electricity NEK has to buy from solar and wind power producers alone would save the company 541 million leva between July 2014 and June 2015.

(AES Gulubovo power plant. Photo: Gonzosft/Wikimedia Commons)

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