Structural Deficiencies, Regulatory Policy and National Regulator Malpractice in the Electricity Sector in Bulgaria

30.05.2014
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In response to repeated disputes between players in Bulgaria power sector, and to worrying signals of repeated regulatory failure and delayed liberalization, the Institute for Market Economics had undertaken analytical efforts to review the practices of the State Energy and Water Regulatory Commission (SEWRC), the national regulator. This report summarizes these efforts.

Independent regulatory agencies in the energy sector have been the subject of numerous studies, mainly focusing on factors that are key to ensuring adequate, efficient and impartial/non-discriminatory regulation. Such factors typically include political, corporate and financial independence, impartial and objective expertise, and a regulatory framework that sets the ground for binding decisions which are difficult to overturn. These and several other factors have been included in both European and national law regulating the energy sector in Europe.

Although the legal and regulatory framework in Bulgaria is generally in line with the good practices outlined by the European law, by and large they remain on paper and are not put into practice. In recent years it has become an established practice for the Bulgarian Regulator to openly violate European and national law, its own Ordinances, and even long-term contracts and obligations. The following report aims to outline some of the deficiencies in the regulatory process and the outright malpractice on behalf of the national regulator in the electricity sector, without claiming to be exhaustive.

 

These include:

  • questionable independence of the regulatory body with signs of borderline coordination of its decisions with the executive body of the government;
  • lack of expert staff and in-depth knowledge of the system;
  • unpredictable market environment;
  • insufficient efforts for creating a stable market environment (some regulatory decisions go as far as to inhibit the creation of such an environment);
  • non-cost-reflective regulatory decisions; the use of cross subsidies both as a tool in the government’s social policy and as financial support for uncompetitive companies;
  • lack of transparency regarding the Regulator’s decisions (there are even examples of Draft Ordinances and Regulatory Rules that have undergone public discussions but are later adopted with a different content);
  • discriminatory treatment of market participants;
  • arbitrary regulatory decisions and even regulatory failure.

 

For more details please see the full report.

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