Parliament passed on August 2 amendments to the Energy Act that provide for the establishment of an independent electric energy system operator.

The model of restructuring of the current state-owned power grid operator, the National Electric Company (NEC), approved in April 2006, envisages setting up a new subsidiary company, Power System Operator. The latter will be 100-per cent owned by NEC and designed to perform both the functions of power grid operator and the balancing market administrator that will also operate and maintain Bulgaria's high-voltage transmission system.

Taking the floor during the discussion in the debating chamber on August 2, Economy and Energy Minister Roumen Ovcharov said the proposed model of restructuring NEC was entirely in line with the relevant European Union directive.

"The new company will be unbundled in terms of organisation, accounting and management and we will have no problems," Ovcharov said.

He said the NEC restructuring model was proposed by the company's board of directors in April 2005 under the previous government, led by the National Movement Simeon II (NMSII).

"That is why I do not see any reason for the NMSII motion for its revision," Ovcharov said, adding that such revision was not possible since it had already been agreed with NEC, and any delay in its practical application would lead to non-performance of the measures envisaged in the government-approved action plan for the energy sector.

Yordan Kostadinov, MP of the NMSII, told reporters in Parliament that if the amendments pass in the form in which proposed by the Cabinet, the price of electricity would go up by about 10 per cent.

Under the Energy Act amendments adopted by the MPs on August 2, the State Energy and Water Regulatory Commission (SEWRC) will approve one-component prices of heat power for end users.

According to the amendments, a month before submitting any application for the approval of new prices or a change in the current ones, public suppliers of gas and electricity, as well as heat transmission enterprises, will have to make their proposal public through the media. SEWRC will approve the prices for each licence-holder in the form of ceiling prices.

What did not happen on August 2 in Parliament but is certain to be on the agenda for next amendments to the Energy Act was for NEC to be forced to buy electricity produced by small-sized hydro power plants and wind- and biomass-fired power stations at preferential prices for a fixed period of 12 years.

The sponsor of the amendments, an MP from the ruling majority, argued that the lenders loan-financing facilities for renewable energy production require from the borrower to have such a long-term contract for the purchase of the respective power plant's output.

NEC is campaigning against the proposed amendments, fearing the new long-term contracts could be too much on top of the 15-year agreements it has already signed to purchase the electricity produced by Maritsa Iztok 2 and 3 thermal power plants.
However, the power grid operator is agreeable to contracts of up to 10 years.

Bulgaria's market for energy from renewable sources is still in its infancy, but its share of overall power production should reach 11 per cent by 2010. The market uptake is seen at 1445MW, including 600MW of wind power capacity.