DG Energy: Bulgaria simulates desire for liberalization of the market, SEWRC is dependent on the government

The list with weaknesses of Energy law is not completed

In an opinion the Directorate General "Energy" makes a devastating critique of the draft Energy Law, which Bulgaria has submitted to the Committee on 28 January this year, according to the said document, said the newspaper "Trud".


It stresses that these are weaknesses, found only on first reading and that their list at this stage is not completed. Experts make the caveat that apparently working document is not binding on a future formal opinion of the Committee on the bill.


Below you’ll find the original document:


Оригиналното становище на DG ENERG

Bulgarian draft energy act (EA) for the transposition of the Third Package Disclaimer: This opinion of DG ENER is not binding for the European Commission as an institution. Your attention is drawn to the fact that the European Commission could adopt a position other than that expressed in this letter, for instance in infringement proceedings, following a detailed examination of the final transposition measure and/or the basis of any new legal or factual elements that may have been brought to its attention.

The provisions mentioned below are at a first glance problematic in view of the 3rd energy package provisions (this is not necessarily an exhaustive list): Remark: The comments are based on the English translation of the draft law as submitted to DG ENER on 28 January 2012 and references also refer to this version of the draft Energy Act (short "EA").

1. Market opening
• Public provider: seems to be against the principle of full market liberalisation as all contracts of the public provider are still regulated and it is based on a historic monopoly. How will the public provider be chosen in the future? Is there a transparent and non-discriminatory procedure in place? When will the public provider be abolished in favour of a more market-based system, e.g. selling through a power exchange or similar market platforms? How is the quota which alternative generators have to provide to the public provider calculated and set (Article 21(1)(21) EA)? What is the relationship between Articles 93a(1) and 100(2) EA?

2. National regulatory authority – Independence and powers a. Independence of SEWRC
• Article 11(2) EA: election of the chairperson and the members of the SEWRC by a decision of the Council of Ministers and appointed by the Prime Minister – political independence not ensured; no transparent nomination procedure foreseen.
• Article 12(3) no. 5 EA: what kind of conflicts of interest is meant here? Is the independence of SEWRC ensured even after such a change in law?
• Article 16(2) EA: adoption of the rules of organisation of SEWRC by the Council of Ministers b. Financial independence
• Article 28(2) EA: tariffs for the different fees, which are the main source of income, are set by the Council of Ministers (on the proposal of SEWRC) – independence?
 • Unclear whether the fees mentioned in the law (Articles 27, 28 and 29 EA) are sufficient for an independent carrying out of the activities. What happens if a review (Article 27(5)) shows that the budget is not sufficient – where will the money then come from?
• Article 27(1) no. 3 and (2) EA: to whom is SEWRC accountable in relation to accepting donations? How will it be controlled that no unallowed donations are accepted and by whom? c. Accountability of regulatory activity
• Accountability of SEWRC not regulated in the draft energy law – to whom is SEWRC accountable, politically and financially? d. Powers of SEWRC
• Powers are largely included in the draft energy law, however, some clarifications would be needed plus it has to be ensured that all monitoring obligations of the NRA are transposed. Some examples for clarifications: what competence does Article 21(1) no. 19 EA refer to in an open and competitive market – what can SEWRC do? Why is the annual report of SEWRC only sent to ACER and the EC, but not to other MS as requested by Article 37(1)(e) of the Electricity Directive and Article 41(1)(e) of the Gas Directive? Why is Article 37(1)(s) of the Electricity Directive not transposed?
• Article 21a EA: why can SEWRC only ask for a statement of ACER on the compatibility with the guidelines adopted based on the Gas Regulation, but not in reference to the Electricity Regulation? What about future guidelines – does this necessitate every time an adoption of an amendment of the EA?
• Article 36(3) EA: Council of Minister adopts – on a motion of SEWRC – the methods of price regulation, etc., which also includes regulation of transmission and distribution tariffs à should be a sole competence of SEWRC.
• Article 30 EA vs. Article 37(10) Electricity Directive/ Article 41(10) Gas Directive: in the draft concordance table, BG says that the transposition is not yet complete, but needs an ordinance for the regulation of prices/tariffs – when will this be provided in line with the provisions of the 3rd Package?
• Article 22(3) EA unnecessarily restricts the possibility to complain to SEWRC (not in line with 3rd Package).

 3. Unbundling a. General comment
• It is necessary that the generation and supply business that is in the public hands are managed by a separate public body from the transmission system operator (in its ISO-form). Who will be the relevant public bodies?
• Ownership unbundling, i.e. Article 9(11) in conjunction with the rest of Article 9 Electricity and Gas Directives, is not implemented. b. Specific comment
• Article 17(2)(c) and (d) of the Electricity and Gas Directives are not transposed in the EA.
• Article 18(2) of the Electricity and Gas Directives are only partially transposed in the EA; the ITO also has to have sufficient resources for developing and maintaining the network (to be defined clearly as a task of the TSO or an obligation for the ITO).
• Article 13(1) Electricity Directive and Article 14(1) Gas Directive require the approval of the European Commission if an ISO is chosen: this requirement has not been transposed in the EA.
• Article 13(4) Electricity Directive and Article 14(4) Gas Directive: separation of tasks between the ISO and the system owner needs to be further clarified.
• Article 81a(4) EA: Not the certification, but the subsequent designation of a TSO has to be published in the Official Journal of the European Union; the provision also does not provide for the procedure following the provision of an opinion by the European Commission, whereas Article 81b EA does provide for it.
• Article 81b(4) EA: adoption of certification decision by Council of Minister not in line with Article 11 of the Electricity and Gas Directives (competence of SERWC!); in contradiction with other provisions of Article 81b EA, e.g. its paragraph 8, which foresees a final decision by SERWC, not the Council of Ministers. à clarify Article 81b EA.
• Article 81c EA unclear. What does it refer to? Why only electricity?
 • Article 81e(3) EA does not include the renewal of the term and the working conditions, including remuneration as also required by Article 19 of the Electricity and Gas Directives.
• Article 81e(3) and (7) EA are contradictory: the right of the concerned person to appeal against the termination of the contract (or other measures which need to be notified) ends before the NRA (i.e. SERWC) could take a decision as SERWC has 3 weeks upon notification, but the concerned person also only 1 week upon notification of the termination.
• Article 81f EA: Reference to Article 81e(3) EA should be applicable to all members of the Supervisory Board (see Article 20(3) 2nd subparagraph of the Electricity and Gas Directives).
• Article 81g(13) EA: the requirement for the ITO to own assets, have its own seat, etc (as required by paragraph 2) cannot be deemed to be fulfilled by a cross-border joint venture; provision to be clarified.
• Article 81l(2) EA: too literal transposition of Article 9(1) and Article 13 Electricity Directive/ Article 14 Gas Directive; need to adapt it to the specificities of the ISO. Reference to the Administrative Board in lit. c and d is missing. Reference to paragraph 5 of the same article as a requirement for an ISO in paragraph 2 is missing.
 • Article 81l(5) EA: why is this only foreseen for gas, but not for electricity?
• Why is Article 81o EA only in there for gas? What does it add to the previous unbundling provisions as all the unbundling provisions seem to be for both electricity and gas?
• Competences of SEWRC to approve contracts in case of an ISO (Article 37(3)(b) Electricity Directive; Article 41(3)(b) Gas Directive) or to monitor the use of congestion rents of the ISO (Article 37(3)(f) Electricity Directive) are not implemented.
• Articles 116(7) and 192 EA provide for setting up the terms and conditions (and other issues) for connection to the network; this is a sole competence of SEWRC and there is no room for a role of the Council of Ministers. c. Tasks of TSOs
• Tasks of TSOs are not defined sufficiently, in particular Articles 12 Electricity Directive and Article 13 Gas Directive are not fully transposed. d. Unbundling of DSOs
rticle 113a EA: unbundling of DSO not fully compliant with Electricity and Gas Directives; unbundling in the law rather weak and needs to be strengthened.
• Article 186a EA: comment says that the combined operator shall be treated in Chapter 8a; no reference to combined operators could be found there.

4. Retail markets and consumer protection a. Price regulation
• Article 30(1) EA (and Article 97(1) EA): too wide scope for end-user price regulation; should be brought fully in line with EU law as it would otherwise undermine market opening.
 • Article 30(2) EA: what are the criteria based on which the existence of competition would be decided? Where and/or by whom will these criteria be defined? b. Other issues
• Universal service: Definition unclear; seems not to be in line with idea of universal service in Article 3 Electricity Directive. Transmission and distribution defined as universal service – why?
• Article 43(2) lit.a, (4), (6), (8) and (9) EA: no demarcation of areas possible for supply of electricity or natural gas by end suppliers as this be contrary to the liberalisation of the market and the creation of a competitive energy market.
• Article 24 EA needs to be further clarified.
• Article 95a EA defines the provider of last resort, however, the definition is going beyond the usual definition of a supplier of last resort; in addition, what are the consequences of defining such a provider of last resort and what are its tasks as these are not defined in the EA?
• Article 3(7) Electricity Directive and Article 3(3) Gas Directive: protection of customers in remote areas not transposed. • Article 3(9)(c) and Annex I(1)(a) Electricity Directive and Annex I(1)(a) Gas Directive: information of consumers about dispute resolution/complaint possibilities not fully transposed.
• Annex I(1)(a) Electricity and Gas Directives: detailed provisions of information which needs to be made available to the consumers are not fully transposed.
• Annex I(1)(b), (d), (f) and (i) Electricity and Gas Directives: no complete transposition could be found in the draft law. • Annex I(1)(h) Electricity and Gas Directives: access to consumer data for new supplier needs to be clarified.
• Article 21(1)(20) EA: deadline for cost-benefit-analysis not defined; clarification of provision regarding timetable and implementation of intelligent meters needed.

5. Other issues
• Articles 34 and 21(1) no. 17 EA: Provisions on sunk cost seem to be incompatible with the 3rd energy package.
• Article 83 EA: the competence to adopt the standards and rules mentioned has to be clarified.
• Article 102 EA and Article 176a EA: not in line with the acquis as the reciprocity rules in the mentioned provisions are going beyond what is allowed by Article 33(3) Electricity Directive and Article 37(2) Gas Directive, respectively.
• Article 172b(3) and (4) EA: full third-party access to these pipelines has to be ensured, except the conditions of a closed distribution system are complied with.
• Article 172d EA: exemptions for major infrastructures are only available for interconnectors, LNG and storage facilities; no possibility of grant such exemptions for other infrastructures; therefore, Article 172d EA is not in line with EU law.
• Articles 176(4) and 197 EA: clarify these provisions on direct lines. Direct lines have to be part of the interconnected system and objective, transparent and non-discriminatory criteria have to be put in place for the granting of authorisations for such lines. If further customers are connected to the direct lines, rules for distribution or transmission systems have to be observed. The provisions mentioned seem also to be in contradiction with the definition § 1(12) of the Supplementary Provisions. See also Article 119(2) EA for electricity.
• Article 196(1) EA: Terms and conditions for connection to gas network in the competence of SEWRC.
• Articles 224a, 224b and 224c EA: reference at least to the Annexes of the Regulations is missing; it seems that the list of provisions from the Regulations is also insufficient.
• Definitions in Supplementary Provisions: ensure full compliance of all definitions with the 3rd energy package and of coherence within the definitions. Where a definition is not needed because it is not used in the main part of the legislation, the definition should be deleted (one example: "site energy works" in No. 41 does not appear in the main part of the text).

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