EMI: In recent months, politicians have been creating three dangerous precedents with a direct effect on the energy infrastructure

The Energy Management Institute has come up with its position on the double payment of compensation to household consumers, which the parliament approved. We are talking about the controversial law on financial support for household end customers and, more precisely, specific points of it related to payments. Here is the entire position of the Energy Management Institute, presented by its Chairman Kaloyan Staykov:

Dear Ladies and Gentlemen,

I am writing to you to express the serious concern of the Energy Management Institute regarding the recent unprecedented response of Bulgarian institutions to the emergency power outages that affected low-voltage networks in mountainous regions during the Christmas holidays in 2024. A response whose most recent and most absurd result was the adoption by the National Assembly on 19.02.2025 and published in the State Gazette on 21.02.2025 of the Law on Providing Financial Support to Household End Customers and in particular Art. 4 thereof, under which fully regulated network operators are obliged to implement and finance state aid at their own expense.

No one has any doubts that the main reason for these outages is extreme weather conditions - climatic factors, such as we have observed in previous years and I doubt we will see the last of them, as they will play an increasingly important role in the development of energy markets and network infrastructure, posing a number of challenges to them. What surprised and worried me, however, was the political behavior during the outages, as well as the subsequent populist actions described below.

Over the past three months, politicians have been creating three dangerous precedents that have a direct and highly negative effect on the development of the network infrastructure, as well as worsening the overall investment environment.

The first precedent is the refusal of the Minister of Energy to issue an order to introduce a restrictive regime due to severe weather conditions, a possibility that is recorded in the Energy Act. The political pressure on the Minister of Energy, which we observe during the holidays, as well as the discretion exercised by him in the face of objectively severe weather conditions, fallen trees and uncleaned roads, provide an alibi for the subsequent actions. Of course, the network operators are appealing this refusal and if the court objectively rules in their favor, the political actions that follow as a result of this unlawful decision will create significant legal and administrative chaos, in addition to the legal uncertainty already created.

The second precedent is the cited legislative decisions, which oblige network operators to pay the penalties provided for in their general conditions, but in double the amount. In this way, the National Assembly not only politically interferes in the work of the independent energy regulator – the Energy and Water Regulatory Commission, which approves the general conditions, but also creates the impression that every problem is solved with a new law, regardless of whether it contradicts the existing regulatory framework. Moreover, the independent energy regulator is conducting an inspection of the situation, which may end with the imposition of administrative sanctions if the companies are found to be at fault. Together with the emergency legislation, this would mean that network operators would be punished twice for the same violation.

The third precedent is the unequal treatment of companies providing services of public interest. In the summer of 2024, a drinking water supply regime was introduced in over 200 settlements. This is an annual phenomenon, but the number of settlements has been growing over the years. However, the topic does not arouse much political interest, and there is even less talk of sanctioning the companies. In the period February 10-20, 2025 about 33% of the homes with central heating in the capital remain without centralized heat supply. Again – there is a lack of political interest in the causes of the accidents, as well as measures to prevent them in the future. Without downplaying the lack of electricity supply, I believe that the supply of drinking water and heat are no less important and it is incomprehensible to focus only on companies from one sector, providing services of public interest.

In light of the above, we expect the responsible institutions to take urgent action to repeal the controversial texts and restore confidence in the legal framework of the Bulgarian business environment.

Background

During the Christmas holidays in 2024, a number of settlements in the mountainous regions of Bulgaria were left without electricity supply as a result of severe weather conditions. A subsequent inspection by the distribution system operators, verified by the affected municipalities, found that the failures covered around 26,000 subscribers. On 28 December 2024, the Minister of Energy announced that the state would double the amount of penalties that electricity distribution companies (EDCs) owe to customers under their general terms and conditions in the event of a prolonged power outage due to their fault. On 30 December, the Council of Ministers adopted a decree approving additional expenditures under the budget of the Ministry of Energy in the amount of 2.2 million leva and instructing the Minister of Energy and the Minister of Finance to approve instructions for the payment of targeted aid.

On 12 February 2025 A group of MPs submitted a Bill on providing financial support to household end-users of electricity, stating in the explanatory memorandum that the bill aims to create a legal framework for the payment of the funds provided. The mechanism for paying the support is as follows: The Ministry of Energy provides the funds to the Electricity System Security Fund; The Fund provides the funds to the End Suppliers; The End Suppliers deduct the compensations from the end-users' bills. If the End Supplier refuses to conclude a contract for the provision of state aid through the ESSF, a sanction of BGN 700,000 is imposed. Between the first and second readings of the bill, a new article was included in it, according to which the funds provided by the ESSF to the End Suppliers are reimbursed by the Fund's ERP within 30 days.

At the same time, the Energy and Water Regulatory Commission is conducting an inspection, the results of which are not yet public. During a hearing in the National Assembly, the regulator said that if the ERP is found to be responsible for the interrupted electricity supply, it will impose administrative sanctions. If this happens, the companies will be punished for the accidents once under these sanctions and once again under the obligation of the ERP to return the support provided by the EUSF to the End Suppliers.

Under the general terms and conditions of the ERP, penalties are due to end customers in the event of a prolonged interruption of electricity supply due to the fault of the companies. The companies are applying to the Minister of Energy for an order to introduce a restrictive regime due to severe weather conditions, which would mean that they are not to blame for the accidents. Such an order has not been issued and under their general terms and conditions, the companies are proceeding to pay the envisaged penalties, which process has already been completed. At the same time, the Minister's refusal is being appealed and if the court rules in favor of the companies, the funds paid to households should be refunded back to the companies. The same applies to a possible administrative sanction by the regulator, as well as the obligation to refund the funds provided by the EUSF to the Final Suppliers.