Bulgarian President Rossen Plevneliev has described the case brought against the three privately-owned electricity distribution companies, which risk losing their licences because of a commercial dispute with state electric utility NEK, as “populist” and criticised the government’s intention to get prosecutors involved.
The State Energy and Water Regulatory Commission (SEWRC) started the procedures on March 19 to repeal the distribution licences held by Austria’s EVN, Czech CEZ and Energo-Pro, on the grounds that the companies were unlawfully offsetting and failing to pay bills due for electricity. NEK said that as a result, it was encountering serious difficulties settling its own debts to electricity producers.
SEWRC said that it was acting within its mandate to “guarantee the normal functioning of the Bulgarian energy system” – threatening the security of electric supplies is the only grounds on which it can repeal distribution licences.
Plevneliev said that NEK was the victim of lack of transparency and too many “administrative-command decisions”. But what Bulgaria’s energy sector needed was a holistic approach, with a new energy strategy and turning SEWRC into an independent and non-partisan regulator, Plevneliev said.
(SEWRC’s current chairperson, Boyan Boev, was appointed by the current government in December 2013 and before that, served as chief executive of NEK’s parent company, the Bulgarian Energy Holding, also appointed by the current ruling axis.)
“The convenient transfer of responsibility to the prosecutor’s office is not a solution. We need a strong regulator and a national strategy that covers all aspects of the energy sector,” Plevneliev said.
Plevneliev’s statement comes after the man currently occupying the prime minister’s seat, Plamen Oresharski, said he hoped that the regulator would not be forced to repeal licences and called on the distribution firms to “meet their commitments and carry out their operations in line with the law and regulations of Bulgaria.”
The electricity distribution firms, for their part, say that the amounts are owed by NEK as compensation for the mandatory purchase of electricity generated by renewable energy firms (which they are required to do by law), but NEK has failed to pay, forcing the electricity distributors to withhold payments to NEK. (The total figure that the three companies owed to NEK, according to the regulator, is 347.6 million leva.)
The issue is rooted in Bulgaria’s renewable energy boom of the past several years, fuelled by the generous feed-in tariff paid by the government. The tariff was meant to encourage renewable energy development to meet the target set for Bulgaria – 16 per cent of all electricity should be generated from renewable sources by 2020 – in the EU directive 2009/28/EC.
Under the law, electricity distribution companies would buy all electricity produced by renewable energy installations and then be refunded by the state utility, NEK. However, the sheer number of new facilities exceeded government expectations, leaving both the government and the regulator scrambling to find the money to foot the bill.
The regulator’s threat also poses a certain legal quandary – EVN, Energo-Pro and CEZ all operate separate infrastructure and commercial subsidiaries, with the former holding the distribution licences, whereas NEK’s dispute is with the trading arms. To repeal the licences, SEWRC will have to prove that EVN, Energo-Pro and CEZ endangered the security of electricity supplies – their main duty under the terms of the distribution licence – by failing to pay NEK on time.