POSITION OF ATEB ON THE DRAFT LAW ON THE STATE BUDGET OF THE REPUBLIC OF BULGARIA FOR 2024.
Regarding the above mentioned Position ATEB addressed the Council of Ministers of Bulgaria, the Ministry of Energy, the Ministry of Economy and Finance, the Parliamentary Committees on Energy, and Budget and Finance, the Energy and Water Regulatory Commission, and the Electricity System Security Fund. The Position is against the taxation prolongation in 2024, foreseen in the draft Law on the State Budget for the next year.
The Position implies the following:
The prolongation of the obligation of traders and producers of electricity to make targeted contributions to the Electricity System Security Fund (FSES) in 2024 raises serious concerns regarding the long-term negative consequences for the Bulgarian electricity market of the implementation of such a proposal.
Extending the effect of a similar non-market measure in Bulgaria also in 2024, despite the expiry of Regulation 2022/1854 already on 30.06.2023, would:
- be in complete contradiction with the recently adopted changes in the Energy Act, aimed at full liberalization of the electricity market in Bulgaria;
- contravene EU policies, recommendations, and legal framework and would represent an isolated case in the EU;
- place Bulgaria in an unfavorable position from the point of view of attracting foreign investments and will block improvements in the direction of energy independence;
- prolong the process of market distortion, lack of incentives to manage the energy portfolios of market participants, limitation of long-term trading;
- increase the uncertainty surrounding the management of funds in the FSES, as the focus of trade once again on a short-term basis will reflect all unfavorable natural and geopolitical factors over which market participants and Bulgaria have no influence.
The arguments in support of our disagreement are as follows:
- The temporary measure of the European Commission (hereafter: EC) regarding the revenue cap applied from 1 December 2022 to 30 June 2023 and the EC has not proposed an extension of this measure in connection with the “Regulation (EU) 2022/1854 of the Council of 6 October 2022 on emergency intervention to address high energy prices; “Given the information currently available to the Commission, the Commission does not recommend an extension of the Council Regulation on the revenue cap”. Indeed, in its assessment of the implementation of Regulation 2022/1854, the EC found that the revenue cap was applied in a very heterogeneous manner and may have affected existing long-term power purchase agreements (PPAs) and other long-term contracts, as well as negatively affected the conclusion of new ones. A potential extension of the measure would hinder one of the objectives set out in the electricity market design proposal, namely to stimulate PPA entry and ensure the most liquid PPA market possible. The imposition of a revenue cap creates regulatory uncertainty that threatens the development of new investments, particularly in renewables. In its “Assessment of Emergency Measures in Electricity Markets”, the Agency for the Cooperation of Energy Regulators (ACER) also found that the disparate application of revenue capping could hinder long-term market investment.
- In the context of the European Semester, the EC explicitly recommended to all member states, but specifically to Bulgaria, to abolish the current energy support measures by the end of 2023. In addition, Bulgaria was also recommended to accelerate the transition to clean energy by faster deployment of renewable energy sources, together with energy storage capacity, thus increasing the flexibility of the energy system.
- In this regard, the prolongation of the measure in Bulgaria in 2024 would be contrary to the legal and political framework of the EU and could prevent the necessary investments, especially in renewable energy sources, necessary to achieve the goals and commitments set at the EU level. Among them, we stress the recently adopted Renewable Energy Directive with binding commitments and obligations related to the promotion of the use of renewable energy sources.
- The introduction of temporary measures by Regulation (EU) 2022/1854 in all cases took into account the joint responsibility of market participants in the European Union for the accumulated excess profits and took into account the application of equal conditions of competition in the relevant market. In this regard, any additional financial burden introduced only for part of the market participants, as is the case with electricity traders and producers in Bulgaria, would be contrary to the spirit and objectives of the measures and is another example of unequal treatment of electricity market participants.
- The prolongation of such a measure in Bulgaria – apart from being inconsistent with the legal and political framework and EU recommendations – would further increase the regulatory risk and unpredictability of the Bulgarian energy market, giving a bad signal for the investment climate in Bulgaria and exposing risk the realization of future investments in RES, respectively the Green transition of Bulgaria. Especially in times of green transition in Europe and significant investments in RES, where Bulgaria competes with neighboring markets, such an indicator is a key factor in achieving the “Fit for 55” goals. .
- It is absolutely unclear why the bill in its part under § 3, para. 3, transitional and final provisions, adopts the date 08.10.2022, by which it should be assessed whether a given manufacturer will fall into the category under para. 1 or under para. 2. It seems that this date was determined arbitrarily, and we cannot find any logic in choosing it as a dividing point (even more so, considering that the start date of the measure was 01.12.2022). This creates further confusion and skepticism about how to define the different categories of persons and casts even greater doubt on the purpose of the measure.
In conclusion, we state that there are no legal and economic grounds for extending the targeted contributions from electricity traders and producers in 2024.
The Position of ATEB calls Bulgarian legislators not to extend the validity period of the earmarked contributions for traders and producers of electricity, as it represents a non-market intervention in the sector, thus significantly harming the electricity market of Bulgaria in the long term, the process of its full liberalization and would be in a clear contradiction with the legal and political framework of the EU.