Important changes to the Bulgarian Energy Act

As part of new changes to the Bulgarian Energy Act, parliament has agreed that the Strategy for Sustainable Energy Development will replace the existing Energy Strategy for 2020 as part of a special focus on renewables and energy efficiency.

The act also includes amendments identifying the Minister of Energy as the authority mandated to notify the EU Commission on what the state is doing to implement the renewable support scheme.

The backbone of the new strategy is the newly established retroactive Contracts for Difference (“CfD”) scheme for renewable energy companies producing 4 or above 4 MW. The deadline for signing the CfD is 31 October 2018. The deadline for entry into force of the CfD was extended to 1 January 2019, and the CfD will remain in place in case of modernisation or upgrade of renewable plants.

There is a specific provision in the law on the termination of the existing Power Purchase Agreements (“PPA”) for renewable energy producers with 4 or above 4 MW installed capacity. When the CfD enters into force, the existing PPA will be deemed terminated.

Another provision of the act is that the administration of the Energy and Water Regulatory Commission (“EWRC”) will now consist of experts providing services under labour contracts, and will not be considered “state servant” as they are now. On the one hand, this will allow the EWRC staff to be better paid, but it will also make the dismissal of under performing consultants easier. The changes are aimed to create a higher level of financial independence for the Commission.

Lastly, as part of the new changes, the EWRC will require owners of energy companies to declare in annual license execution reports any intention to split, spin-off, merge, or dispose of shares representing more than 20% of the capital or sales of parts or assets of an energy company. This hotly debated amendment found support following recent issues and concerning regarding the disposal of CEZ assets.

Despite being heavily criticised by energy producers, the provisions requiring substantial bank guarantees or deposits for traders and producers that decrease over time, were approved without debate.

The important changes to the Bulgarian Energy Act are now published in the State Gazette and have entered into force. Secondary legislation following the publication of the bill will be adopted no later than 30 June 2018. By the same date, EWRC will announce the methodology by which the regulator will be determining reference prices.

For more information on the Energy Act and how these changes might affect your business, please contact: Kostadin Sirleshtov and Angel Bangachev.

Article co-authored by Diyan Georgiev.