Bulgaria to set up energy fund to cover state utility deficits

Written by on July 22, 2015 in Bulgaria - Comments Off on Bulgaria to set up energy fund to cover state utility deficits

Bulgaria’s Parliament passed at second reading on July 22 amendments to the Energy Act that envision the creation of a new fund to cover deficits at state-owned electric utility NEK.

The amendments will require all electricity producers and importers to pay five per cent of their revenues into a new “electricity system security” fund every month. The fund would be managed by a seven-person managing board, whose chairperson would be appointed by the Energy Ministry.

The rest of the board would include one more representative from the energy ministry, two from the finance ministry and one from the environment ministry, as well as two representatives for the electricity producers.

The bill is the latest in a series of attempts to balance the books at NEK, which has accumulated billions in debt over the past several years because of the high number of renewable energy projects in the country – under Bulgarian law, the utility is required to pay the generous government feed-in tariff to the electricity producers.

Several attempts to draft a compensation mechanism by either reducing the government subsidy or generating additional revenue have all failed in the goal of reducing NEK’s deficits, while the utility regulator has balked at the prospect of raising consumer prices to fully factor the drastic increase in electricity generated from renewable sources because of the expected consumer backlash, such as the street protests that brought down the previous government of Prime Minister Boiko Borissov in February 2013.

The Energy and Water Regulatory Commission (EWRC) sought to fix the issue by a sharp hike in the “social responsibility” fee paid by large-scale industrial consumers – the fee introduced in 2013 to replace renewable energy and power grid loss surcharges – but the companies affected by the changes objected loudly against the move, with Parliament asking the regulator to defer the hike by one month to August 1.

The bill is expected to be published in the State Gazette by the end of the week, which would allow EWRC to meet the deadline in announcing the new electricity prices, public broadcaster Bulgarian National Radio (BNR) reported.

BNR quoted the regulator’s chief, Ivan Ivanov, saying that industrial consumers will still pay a higher “social responsibility” fee under the amended price model prepared by the EWRC, but it would be lower than initially envisaged.

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