POSITION OF THE ENERGY MANAGEMENT INSTITUTE ON THE LAW FOR GIVING FINANCIAL SUPPORT TO HOUSEHOLD CUSTOMERS ADOPTED BY THE NATIONAL ASSEMBLY (SG 15/21.02.2025)
LADIES AND GENTLEMEN,
I am writing to you to express the Energy Management Institute’s grave concern about the recent unprecedented response by Bulgarian institutions to the emergency power cuts affecting low voltage networks in mountainous areas during the Christmas holidays in 2024. A response whose most recent and most absurd result was the Law on the Provision of Financial Support to Domestic Final Customers, adopted by the National Assembly on 19.02.2025 and published in the State Gazette as early as 21.02.2025, and in particular Article 4 thereof, under which fully regulated network operators are obliged to implement and finance at their own expense state aid.
There was no doubt in anyone’s mind that the main cause of these outages was extreme weather conditions – weather factors such as we have seen in previous years and I doubt we will see for the last time, as they will play an increasing role in the development of energy markets and network infrastructure, posing a number of challenges to them. What has surprised and worried me, however, is the political behaviour during the outages, and the subsequent populist actions described below.
Over the past three months, politicians have set three dangerous precedents that have had a direct and highly negative effect on the development of network infrastructure, as well as worsening the overall investment environment.
The first precedent is the refusal of the Minister of Energy to issue an order for the introduction of a restrictive regime due to severe weather conditions, an option enshrined in the Energy Act. The political pressure on the Energy Minister that we have seen over the holidays, and the discretion he has exercised in the face of objectively severe weather, fallen trees and uncleared roads, provide an alibi for the actions that followed. Of course, the network operators are appealing against this refusal, and if the court were to rule objectively in their favour, the subsequent political action resulting from this unlawful decision would cause considerable legal and administrative chaos, in addition to the legal uncertainty already created.
The second precedent is the cited legislative decisions which oblige network operators to pay the penalties provided for in their general terms and conditions, but in double the amount. In this way, the National Assembly not only politically interferes in the work of the independent energy regulator, the Energy and Water Regulatory Commission, which approves the general conditions, but also creates the perception that every problem is solved by a new law, regardless of whether it contradicts the existing legal framework. Moreover, the independent energy regulator carries out a review of the situation, which may end up imposing administrative sanctions if the companies are found to be at fault. In conjunction with the emergency legislation, this would mean that network operators would be punished twice for the same infringement.
The third precedent is the unequal treatment of companies providing public interest services. In the summer of 2024, a drinking water supply regime was introduced in over 200 locations. This is an annual phenomenon, but the number of localities has been growing over the years. However, the issue has not attracted much political interest, let alone any talk of penalising the companies. In the period 10-20 February 2025, about 33% of homes with central heating in the capital remain without district heating. Again, there is a lack of political interest in the causes of the breakdowns and measures to prevent them in the future. Without making light of the lack of electricity supply, I believe that the supply of drinking water and heat is no less important, and the fixation only on companies in one sector providing services in the public interest is incomprehensible.
In the light of the above, we rely on the responsible institutions to take urgent action to repeal the controversial texts and restore confidence in the legal framework of the Bulgarian business environment.
Background
During the Christmas holidays in 2024, a number of settlements in the mountainous regions of Bulgaria remain without electricity supply as a result of severe weather conditions. Subsequent verification by the distribution system operators, verified by the affected municipalities, found that the outages covered around 26,000 subscribers. On 28 December 2024, the Minister of Energy announced that the State would duplicate the amount of penalties that electricity distribution companies (EDCs) owe to customers under their terms and conditions in the event of a prolonged power outage caused by them. On 30 December, the Council of Ministers adopted a decree approving additional expenditure in the budget of the Ministry of Energy in the amount of BGN 2.2 million and instructing the Minister of Energy and the Minister of Finance to approve guidelines for the payment of the targeted aid.
On 12 February 2025, a group of MPs submitted a Bill on the provision of financial support to domestic electricity end-users, stating in the explanatory memorandum that the Bill aims to establish a legal framework for the disbursement of the earmarked funds. The mechanism for disbursement of the support is as follows: the Ministry of Energy shall provide the funds to the Electricity System Security Fund; the Fund shall provide the funds to the Final Suppliers; the Final Suppliers shall deduct the compensation from the final customers’ bills. If the Final Supplier refuses to enter into a contract for the provision of the State aid through the EUSF, a penalty of BGN 700 000 shall be imposed. Between the first and second readings of the bill, a new article has been included, according to which the funds granted by the EUSF to the Final Suppliers shall be reimbursed by the EDC to the Fund within 30 days.
At the same time, the Energy and Water Regulatory Commission is conducting an inspection, the results of which are not yet public. During a hearing in the National Assembly, the regulator says that if the EDCs are found responsible for the disrupted electricity supply, it will impose administrative sanctions. If this happens, the companies will be punished for the breakdowns once under these penalties and once more under the obligation of the EDCs to return the support provided by the FSF to the End Suppliers.
Under the EPC’s terms and conditions, penalties are payable to End Customers in the event of a prolonged interruption of electricity supply caused by the companies. The companies applied to the Secretary of State for Energy for an order to introduce a curtailment regime due to the severe weather conditions, which would mean that they were not at fault for the failures. No such order has been issued and under their terms and conditions the companies are proceeding to pay the stipulated penalties, which process has now been completed. At the same time, the Minister’s refusal is being appealed and if the court rules in favour of the companies, the monies paid to the households should be refunded back to the companies. The same applies to a possible administrative sanction by the regulator, as well as the obligation to repay the funds provided by the FES to the End Suppliers.
KALOYAN STAYKOV
CHAIRMAN OF THE ENERGY MANAGEMENT INSTITUTE
PS. The official letter sent to the institutions can be downloaded from this link.
