Банкеръ Weekly


Brussels Puts Bulgaria's Energy Sector Under Scrutiny

It seems that along with the case of the seemingly frozen "South Stream", officials from Brussels have carefully been digging in Bulgaria's energy sector. The European Commission notified last week Bulgarian Energy Holding (BEH) for its prior opinion, stating that the company creates barriers to free trade in electricity. The problem is that most of the agreements for the supply of electricity concluded between the holding company and its trading partners, stipulate that electricity can be resold only in Bulgaria or abroad, thus excluding the EU market market. The contracts also provide for controls and sanctions that allow BEH to monitor and punish its customers who do not respect the clauses.

Brussels also pointed out that such territorial restrictions are prohibited by Art. 102 of the Treaty on the Functioning of the EU and lead "to a distortion of energy distribution in the single market, affecting the liquidity and efficiency of markets for electricity and establish artificial barriers to trade between Bulgaria and other Member States."

It is hardly a coincidence that the Commission opened formal proceedings for this offense on 27 November 2012 and, while the decision comes only now. But the worst thing is the sanction - if the fault is confirmed, the holding company can be penalized with up to 10 per cent of its turnover for the previous year. According to its consolidated statements for 2013, its revenues were 5.697 billion levs. I.e. the holding may have to "say goodbye" to nearly 570 million levs.

"The procedure applies to certain provisions in agreements for the supply of electricity, which to date are not applied and were entered into by subsidiaries of Bulgarian Energy Holding JSC (the National Electricity Company, Maritza East 2 and NPP Kozloduy) prior to its opening. As the European Commission expressly states in its Communication, the statement of objections contains only the initial opinion and does not prejudge the final outcome of the procedure. In this regard, BEH will prepare an analysis to respond to the Commission in the second half of 2014," said an official of the holding.

This, however, does not deplete Bulgaria's energy woes. A little later it became clear that Brussels started and infringement procedure against Bulgaria for its default to implement the directive on energy efficiency. It may be somewhat comforting that the country is in the company of 23 other EU member states who have missed the deadline, June 5, to synchronize their legislation with that of the community.

"As the Directive has an extended scope and introduces new obligations and entirely new Energy Efficiency Act was developed. It successfully passed a public consultation procedure and interdepartmental coordination, with the result that on 18 July 2014 it was submitted for consideration to the Cabinet. Due to the following resignation of the government, the draft bill was not viewed and passed. The interim government has no legislative initiative due to the lack of existing National Assembly and it is expected the draft law on energy efficiency to be approved in a timely manner after the formation of the next regular Parliament," said the energy ministry.

In a separate investigation Brussels examined whether Bulgarian Energy Holding and its subsidiaries Bulgargas (trading in gas) and Bulgartransgas, a unit transporting natural gas, hinder their competitors to gain access to key gas infrastructure in the country in violation of the antitrust rules of the European Union. A formal procedure opened in July 2013 and is waiting for a decision.


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