AmCham Position on Bulgaria Implementation Plan: Energy Market

The American Chamber of Commerce in Bulgaria took part in the Consultation on Bulgarian Electricity Market – Implementation plan (BEMIP). It was published on January 20th, 2021. As stated in its introduction, the document is presented by Bulgarian Government and it should be considered as an implementation plan of Bulgaria in accordance with Article 20 of Regulation 2019/943 in the context of the ongoing process of approving State Aid for the introduction of a Capacity mechanism in Bulgaria. This position was sent to the Ministry of Energy of Bulgaria too.

AmCham Bulgaria recognizes the need for liberalization of the electricity market in Bulgaria. We support the efforts of the Bulgarian government to foster these needed reforms to address the EU requirements, as well as to provide sustainable electrical and gas supply to the business, households at fair market prices.

However, we are witnessing for a second time in one month that there is a lack of domestic coordination and consultation with the respective stakeholders in the Energy sector in Bulgaria. Therefore, we would like to raise our concerns about the proposals in that the Bulgarian market reform plan.

First, the BEMIP foresees the termination of the long-term contracts (the so-called PPAs) with Maritsa East 1 (ME1), owned by AES Bulgaria and Maritsa East 3 (ME3), owned by ContourGlobal Maritsa East 3. In these projects were invested at least EUR 2 billion to respectively build from scratch the most modern thermal power station in Southeast Europe and has done an extensive refurbishment and modernization of an existing power plant, which became the first in Bulgaria to meet the European Union environmental standards. The two generators have a total capacity of more than 1,500 MW, secure 1,000 jobs and at least 28,000 in their supply chain, and they represent the most modern and environmentally compliant conventional power stations in Southeast Europe. They invest millions of euro each year to maintain their top-class operations, fulfilling all national and European requirements (Environment protection, Health and Safety, Excellence in operations, Digitalization, etc.)

These PPAs were introduced in 2001/2007 to secure the supply of electricity of Bulgaria through renewal of its generation fleet in full compliance with the European environmental requirements for combustion installations. Any threat towards legitimate contracts in the European Union can damage the reputation of Bulgaria before international partners.

Second, given the short notice in the BEMIP, and the lack of information how the Bulgarian government can execute it to introduce applicable capacity mechanisms, we cannot see any reason and plan how this specific reform will be implemented. If the Bulgarian state takes unilateral actions to terminate the PPAs, however, the consequences for a EU member state as Bulgaria will be unpredictable in terms of securing electricity supply, securing the national transmission grid, as well as damaging its investment climate, financial reputation, etc. In addition, both operators’ only choice will be to defend their investments and reputation in the court.

Third, We consider this situation as part of a political justification for the of lack of higher priority reforms in the Energy sector so far. Both operators have said many times that they are willing to be part of a constructive dialogue with the government of Bulgaria (resp. Ministry of Energy). However, to date there is no strategic plan for improving the Energy sector of Bulgaria by respecting the interests and investments of private owners of two well-operated and functioning power stations.

Fourth, BEMIP sets the date June 30th, 2021 in a document that was introduced before the European Commission (“EC”). However, the date and the proposed planned actions have not been discussed and agreed with any of the stakeholders in Bulgaria, even if there have been repeated statements that any changes to the PPA will be the result of good-faith negotiations respecting the investors’ interests.

Fifth, on 09.02.2021 a public consultation on the revised draft of the Strategy for Sustainable Energy Development of the Republic of Bulgaria until 2030 with a horizon until 2050 was initiated by the Bulgarian Ministry of Energy. In that respect, since the main goal of BEMIP is to address the adoption of adequate measures to eliminate identified regulatory distortions or market failures, it is quite ambiguous to what extent BEMIP will comply to the main aims, envisaged in Strategy, which are still under public scrutiny and may be subject to further changes. (…) Furthermore, such lack of transparency, coordination and consensus on national level entails a significant risk to devalue and/or even derail the public trust with respect to the whole market reform in the Bulgarian energy sector.

Sixth, the proposed changes do not have a solid argumentation why they are introduced, nor any holistic analysis of the impact of the changes in the energy sector. These changes do not have neither any impact assessment, nor a plan for capacity mechanism introduction in parallel.

Seventh, such a proposal does not reflect the potential risk for lack of power supply to major stakeholders in the country in a year in which we all hope will bring economic relief and growth. At the time of the largest transformation of the energy sector of Bulgaria due to the EU Green Deal, such proposals open another front for confrontation instead of introducing large public discussion about the future of the energy regions.

Download AmCham Bulgaria Position on Bulgaria Energy Market – Implementation Plan