Czech-owned Energo-Pro became the second electricity distribution firm to file an arbitration claim against Bulgaria with the World Bank’s arbitration institution Icsid, joining Austrian EVN, which opened similar litigation last year.
Energo-Pro filed its lawsuit in late May, but no details as to the substance of its claim. Last year, the company threatened to open litigation over the utilities regulator’s pricing of electricity, as well the regulatory framework that required distribution companies to buy all electricity produced from renewable energy sources.
The distribution firms are then to be compensated by the state utility NEK, but NEK has been largely unable to make the payments for more than a year, running up debts estimated to be in the hundreds of millions of euro – but the exact figure has not been made public.
This prompted the electricity distributors to withhold payments from NEK last year, a decision that the regulator’s previous line-up said was unfair. The regulator opened proceedings to strip the distribution companies of their licences, opening itself to accusations of towing the line of the now-departed Plamen Oresharski administration, charges that it denied.
Despite frequent criticism, the regulator is yet to change the regulatory framework. 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 – by the European Commission. Bulgaria already exceeds that target, while the renewables boom has created a large surplus of capacity well above the domestic consumption.