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26.03.2014 15:34
Bulgarian Regulator Threatens to Cancel the Licenses of CEZ, EVN and Energo-Pro
The conflict between the state-owned National Electricity Company (NEK) and Bulgaria’s three regional electricity distribution companies managed by CEZ, EVN and Energo-Pro over mutual debt is nowhere near a solution

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A dispute, which has been gradually growing bigger since 2013, between the state-owned National Electricity Company (NEK) and Bulgaria’s three regional electricity distribution companies managed by CEZ, EVN and Energo-Pro over mutual debt is still awaiting a solution. NEK is seeking over BGN 300 million (about EUR 150 m) from the three utilities in unpaid electricity, while CEZ, EVN and Energo-Pro said they have been partially upholding their payments because NEK failed to pay them over BGN 1 bn for all the renewable energy they are obliged to buy by law. If the three companies fail to pay the amount requested by NEK, they are under a threat to lose their electricity distribution licenses.

Unlike neighboring Romania, for example, which uses green certificates, Bulgaria has chosen to subsidize renewable energy through feed-in tariffs. Distribution companies are obliged to buy all the renewable electricity produced and then sell it to NEK, which on its way refunds them. An uncontrolled boom of renewables however led to a financial struggle at both NEK and the three utilities. Another major contributor to these deficits and the ensuing conflict has been the fact that households electricity price was reduced at three times in 2013, while utilities have been forced to sell it cheaper (at BGN 86.76/MWh before VAT) than they buy it from NEK (at BGN 107.34/MWh before VAT).

In an alleged attempt to rebalance the country’s energy system, the Bulgarian energy regulator, not without the support of minister Stoinev and the government, threatened on March 17 CEZ, EVN and Energo-Pro with licenses revocation unless they pay the amounts due to NEK. Two of the utilities – EVN and Energo-Pro, fired back by filing lawsuits with the International Centre for Settlement of Investment Disputes in Washington, U.S., in 2013 and 2014, respectively.

With the escalation of the situation energy experts called for the withdrawal of the ultimatum imposed on the utilities, arguing that this would further exacerbate the situation allowing for non-transparent operators to claim their place.

“Even if the utilities pay the amount to NEK, it will not provide a solution to the ensuing crisis in the Bulgarian energy sector. Furthermore, if their licenses are cancelled, this will provide fertile soil for non-transaprent new players to enter the market. Ultimately, Bulgarian consumers will have to pay the price of the potential ensuing sanctions against Bulgaria, if this happens”, Ivanka Dilovska of the Energy Management Institute said during a press conference yesterday.

The Bulgarian Photovoltaic Association and other organisations from the private energy sector launched the idea of an "energy board" as a possible solution.

CEZ, EVN and Energo-Pro have been given time until the end of the day to pay these over BGN 300 million to NEK.

TAGS: Bulgaria | electricity distribution | CEZ | EVN | Energo-Pro | National Electricity Company | NEK | renewables | feed-in tariffs | debt | arbitration 

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