Bulgaria's Energy and Water Regulator Commission (EWRC) announced on 1 January 2022 that renewable energy producers in Bulgaria will see their estimated market prices rise from BGN 119 per MWh to BGN 293.37 per MWh.
This price hike represents an overnight increase of 247% and a 20-25% decrease in income for renewable producers tied into long-term "offtake" contracts (for prices at or close to BGN 119) in force between 1 July 2021 and 30 June 2022. These prices are expected to remain in place at least until 1 July 2022 when a new regulatory decision is expected from the EWRC.
Past uncertainty
This uncertainty has not been seen in the Bulgarian renewable sector since 14 September 2012 when the EWRC (then known as the State Energy and Water Regulatory Commission) initiated the first in a series of major retroactive changes, which brought two years of uncertainty to this sector. The market turmoil began with the introduction of Decision C-14/14.09.2012, which the regulator uploaded to its website without prior warning and in violation of legal procedures. This Decision imposed “temporary access to the grid fee”, which cut the Feed-In Tariff (FiT) by up to 39%.
In 2013, the Bulgarian supreme administrative court repealed this “temporary access to the grid fee” just before the Bulgarian parliament imposed a “solar and wind 20% fee”, which was declared unconstitutional in August 2014. These and other measures (e.g. permanent access to the grid fee, limitation of the eligible hours for FiT offtake, etc.) had a devastating effect on the Bulgarian energy sector. Investment in this sector dwindled, projects were scrubbed and several leading international investors and financial institutions blacklisted Bulgaria.
Moratorium on energy prices
A measure of certainty eventually returned to the Bulgarian energy sector until late last year when a newly elected Bulgarian parliament voted to impose “a moratorium over the price of electricity, water and district heating on the regulated market at the levels of 16 December 2021” until 31 March 2022.
As a result of this moratorium, on 15 December 2021 the EWRC announced that it woulddelay"all its sessions related to the regulation of the prices in the 'Electricity', 'District Heating' and 'Water Supply and Sewerage' sectors” (i.e. the EWRC would delay the planned increase of the “reference prices” for all regulated renewables with installed capacity of above 0.5 MW, which previously enjoyed the FiT and are currently operating under Contracts for Premium or CfP).
Then on 1 January 2022, the EWRC published an outline of its decision to increase market price estimates by 247% on its website – a policy that will be in force until 1 July 2022.
Court appeals expected
According to analysts, there is little doubt that the Bulgarian courts will repeal the EWRC’s 1 January decision on the grounds of procedural legal deficiencies that took place prior to the decision's drafting and uploading. However, many consider it highly unfortunate that the sector's main gatekeeper, the EWRC, has upended the period of relative market certainty that reigned in the sector between 2015 and 2021.
All is not lost. In 2022, the Bulgarian government, which has called for the sustainable development of the renewable energy, will have ample opportunity to return the rule of law to this sector.
For more information on the Bulgarian energy sector, contact local CMS experts: Kostadin Sirleshtov, Borislava Piperkova and Elena Yotova-Yordanova.
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