The press center of the Council of Ministers announced on 9 April 2013 that a confirmation on behalf of the European Commission, starting inspection of the Bulgarian energy sector, had been received. The letter has been sent by Commissioner Gunther Oettinger. The inspection starts next week. It will be lead by representatives of the Directorate General for Energy of the EC.
The experts will review the legislative framework and the structure components of the Bulgarian energy sector, aiming at identifying the major problems of the sector.
In its course the EC experts will hold bilateral meetings with the teams of MEET and SEWRC, as well as with managers of large companies in the energy sector. The inspection will focus on the following key topics:
- powers and independence of the national regulator;
- BEH and its role in the Bulgarian energy market;
- the structure and the operation of the national electricity market;
- the structure and the operation of the national gas market, taking into account the diversification and the specific features of gas production;
- price formation mechanisms in the energy sector.
The inspection was settled during the visit to Brussels of the Prime Minister Marin Raykov, the Deputy Prime Minister Ekaterina Zaharieva and the Minister of Economy, Energy and Tourism – Assen Vassilev.
Background
The majority of the topics referred are subject to continuous monitoring and analysis on behalf of the European Commission, regarding the implementation of the Third Energy Liberalisation Package and the state of the European internal market in electricity and natural gas, as its conclusions on that were extensively reported in the Communication of the EC of November 2012.
The key issues for Bulgaria regarding the functioning of the internal energy market were identified by the Commission, even then (see the link above):
With regard to electricity, the public provider system, which entrenches market domination by NEK, should be eliminated in favour of a market-based approach where generators and suppliers are free to choose their contracting parties. While taking into account universal service obligation and effective protection of vulnerable customers, Bulgaria needs gradually to phase out regulated prices and eliminate all transaction-related transmission charges that distort the free flow of electricity across borders. It needs to continue working on setting up a power exchange in order to facilitate organised trading in electricity and increase integration with neighbouring countries, as recommended by the Council.
It should ensure the independence of transmission and distribution system operators and organise a properly functioning balancing market. Bulgaria needs to safeguard the independence of the National Regulatory Authority.
With regard to gas, Bulgaria should set up an organised wholesale market in order to allow competitors of Bulgargaz to enter the market. Full third-party access to gas pipelines should be implemented, including virtual reverse-flows on all pipelines.
The national pipeline system should be fully connected with the ‘transit’ system and supply sources diversified in view of high dependence on imports from Russia.
While ensuring adequate protection of vulnerable customers, regulated prices must be gradually phased out.
Regulatory obstacles to supplier switching (such as additional costs) must be removed, and switching must be proactively supported through transparency and information dissemination measures. Bulgaria should continue developing demand side measures (e.g. interruptible contracts) to manage demand especially in the event of supply disruptions. Expanding underground storage capacity and interconnection capacity would help to reduce exposure to external events, as also recommended by the Council.
On the basis of these conclusions, the Energy Management Institute identified eight recommendations to the electricity market, which substantially are an emergency plan for the Bulgarian energy sector.
Meanwhile, in January the Commission referred Bulgaria to the Court of Justice of the European Union for failing to fully transpose the internal energy market rules, in which Oettinger announced that “The delays in the implementation of the EU internal energy market rules have negative implications on all participants and therefore they are intolerable”.
Bulgarian Energy Holding in turn, is subject to formal antitrust proceedings performed by the EC, aimed at investigating whether there is an evidence of abuse of dominant market position and hindering the competition in the Bulgarian wholesale electricity market.
