Bulgaria: The Impact Of The EU Third Energy Package On Bulgarian Legislation

Last Updated: 17 February 2010
Article by Stefana Tsekova and Elena Rangelova

This article was originally published in the schoenherr roadmap`10 - if you would like to receive a complimentary copy of this publication, please visit: http://www.schoenherr.eu/roadmap.

The third energy package (TEP) aims at the development of the electricity and gas markets, particularly the separation of supply and generation activities from transmission operations. The TEP further aims to harmonise the powers of national energy regulators and to ensure their greater independence, while strengthening cooperation between them.

Independence of network operation (unbundling)

Under the provisions of the TEP, the EU member states will have the opportunity to choose between three different approaches on more effective unbundling.

  • Full ownership unbundling (OU) – The transmission system operator (TSO) owns the electricity/gas network and is not controlled, directly or indirectly, by a vertically integrated undertaking (VIU) that is also active in supply and generation.
  • Independent System Operator (ISO) – VIUs retain ownership of their transmission networks but must hand over the operation, maintenance and development of the transmission system to a separate entity, the ISO.
  • An Independent Transmission Operator (ITO) model (the so-called "third way approach") – The TSO remains within the VIU but additional regulatory conditions are introduced in order to guarantee the independence of the ITO from the VIU.

Bulgaria is one of the eight member states that will develop the "third way approach" in order to avoid implementation of OU and ISO models. The Bulgarian position on unbundling was that the OU option could have negative social consequences due to the fact that Bulgarian customers depend on a single supplier.
Currently, in Bulgaria the main activities in generation, supply and transmission of electricity and gas are controlled by the Bulgarian Energy Holding EAD (BEH EAD).

BEH EAD was incorporated on 18 September 2008 through a Decision of the Minister of Economy and Energy as a shareholding company with 100% state owned participation. Amongst others, the holding includes:

  • NEK EAD – generation and transmission of electrical energy, public supply monopolist, owner of the power transmission network, etc;
  • ESO EAD (100% owned by NEK EAD) – operation, overhaul and maintenance of the transmission network, operational regime planning and control of the electrical power system, etc.;
  • Bulgargaz EAD – natural gas public supply monopolist;
  • Bulgartransgaz EAD – transmission, transit transmission and storage of natural gas, maintenance, operation, management and development of underground gas storage.

The contemplated restructuring of BEH in order to comply with the ITO model is planned to be completed within a year and a half. Such restructuring should aim mainly at transfer of ownership of the electricity transmission network from NEK EAD to Electricity System Operator EAD, as well as legal and organisational unbundling within Bulgartrasngas so as to separate the gas transmission system from the gas storage system. To achieve this, additional amendments to the Bulgarian energy legislation – particularly the Energy Act, the regulations on the prices of electricity and natural gas and trade rules – are required.

Independent national regulatory authority

The State Energy and Water Regulatory Commission (the Commission) is the Bulgarian energy regulatory body for the energy and gas sector.

An element of the TEP is the commitment of each EU country to ensure that its national regulator:

  • is independent from the interests of the government, industry (public and private entities) and the market;
  • has sufficient financial and technical capacity to perform its functions; and
  • is impartial and transparent in its activities.

Pursuant to the provisions of the ACER Regulation, the Bulgarian regulator must obtain greater powers and responsibilities with regard to the separation of activities (transmission and distribution), mandatory investment and abuse of dominant position. Furthermore, the regulator will be entitled to impose "effective, proportionate and dissuasive penalties" against electricity and gas undertakings not complying with their obligations or not performing legally binding decision issued by the Commission. This requires further amendments to the Energy Act as the Commission does not at present have sufficient powers. Such legislative changes will make the Bulgarian regulator the most important energy institution in the state.

The adoption of the TEP enforces the strengthening of the functions of the Commission to control network (grid) operators through approval of long-term plans for their development and future coordination with ACER. Thus, the network (grid) operators can be controlled and the necessary investment in electricity grid provided.

Improved customer protection

Customer protection and the consumer rights are among the main issues of the TEP. The New Electricity and New Gas Directives provide some improved measures on consumer protection. Customers will have the right to:

  • change their electricity or gas supplier, while respecting contractual conditions. The change will be performed by the operator(s) concerned within three weeks. In addition the customers will not be charged for changing suppliers;
  • receive a final closure account following any change of gas or electricity supplier no later than six weeks after the respective change;
  • receive all essential data related with the electricity or gas consumption;
  • be properly informed of actual electricity or gas consumption and costs frequently enough to enable them to regulate their electricity consumption;
  • compensation and refund arrangements, which apply if contracted service quality levels are not met, including in case of inaccurate or delayed billing.

General customer protection provisions are included in the Bulgarian Consumer Protection Act (published State Gazette No. 99/2005 as last amended with State Gazette No. 42/2009). The Energy Act introduces specific measures to protect consumers in terms of full liberalisation of the electricity market – for household users and small to medium-sized enterprises, electricity at regulated prices is guaranteed.

The expected implementation in the national legislation of the provisions related to customer rights and their protection will be one of the main and most important changes in the near future.

The regulator will be entitled to impose 'effective, proportionate and dissuasive penalties' against electricity and gas undertakings not complying with their obligations or not performing legally binding decision issued by the Commission.

This article was originally published in the schoenherr roadmap`10 - if you would like to receive a complimentary copy of this publication, please visit: http://www.schoenherr.eu/roadmap.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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