The Bulgarian Parliament has approved a controversial 20% fee on the income of solar and wind power plants, as well as a restriction -- for all renewables -- of the amount of electricity produced that can be purchased at preferential prices.

On 5 December 2013, the Bulgarian Parliament approved an amendment of the renewable energy law intended to decrease the amounts paid to renewable energy producers under the long-term power purchase agreements.

The official text of the amendment as approved by the Parliament is yet to be released. According to the draft, which is deemed to have been voted on, the main provisions are:

(a) A 20% fee on solar and wind parks

A new fee will be imposed on the income of producers of electricity from solar and wind power plants. The fee will be calculated as 20% on the amount received by the producer for the electricity purchased at the preferential price (net VAT). It will be deducted by the grid company from the payment that is owed under the power purchase agreement.

(b) Limitation of the amount of electricity purchased at preferential price

For all renewable, the amount of electricity that will be purchased at preferential prices will be limited to a threshold set by the State Regulatory Energy and Water Commission. The electricity produced in excess of this threshold will be purchased at a lower price equal to the regulated price at which the public provider sells electricity to the end suppliers.

The wording of the provisions, as available, is not precise; many questions with respect to the application of the 20% fee and the calculation of the thresholds are still to be clarified and it is likely these open issues will be dealt with in the law's transitional and closing provisions.

The controversial provisions were first introduced at the very end of November without discussion in the course of the review of the national budget law for 2014. They were added to transitional provisions of the draft budget law between the first and the second hearing of the latter draft without any substantial arguments to support such an extraordinary measure.

With that regard, it should be noted that Bulgaria's national public provider (the state-owned National Electricity Company) has been incurring substantial losses recently because the preferential feed-in tariff is not appropriately reflected in the regulated electricity price for end consumers. Since the government cannot afford to increase the price for end consumers to the level at which the green premium would be fully compensated, the amendment outlined above provides a temporary, albeit questionable, solution to the problem.

The amendment seems to stand in contradiction to the European Commission's recent recommendations not to impose retroactive restrictions on exiting investments in renewable energy. Bulgaria's renewable energy industry associations have already filed complaints alleging that the measures will effectively expropriate more than 40% of the income of the private investors. Also, there are indications that the President of Bulgaria might impose a veto on the amendment within the two weeks after the final text is signed off by the Parliament. If that occurs, the amendment will once again be put forward for discussion at the Parliament. Otherwise, unless the Parliament reconsiders the provisions in the light of the renewable industry complaints, the provisions might become effective before the end of December 2013.

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