Bulgaria prepares 5% levy on income of electricity producers
Wind turbine. Author: Michel Filion. Licence: Creative Commons
Bulgaria plans to impose a 5% tax on the monthly income of all electricity producers in the country in an attempt to cover part of the deficit which the state-owned National Electricity Company (NEK) has accumulated, a draft bill approved by the energy committee in parliament on Tuesday indicated.
The proceeds from the planned tax will go to an Energy System Security Fund that is yet to be set up, according to the draft bill, published on parliament's website. The fund will cover part of NEK's deficit resulting from its obligation to buy power from local producers at fixed prices under long-term power purchase contracts, which it then sells at a much lower price to the electricity distributors supplying the regulated market.
Renewable energy producers face an even bigger drop in revenue since the bill also envisages a cut in the amount of power output they can sell at feed-in tariff level.
At present, renewable energy producers sell all the power they produce at feed-in tariff level. In a move to save NEK from its financial doldrums, however, lawmakers are proposing that the energy regulator determine an electricity production threshold, specific for all companies, as they would sell all output above it at a price equal to the price for surplus balancing energy.
Renewable power plants where an investigation by the Public Financial Inspection Agency has established a difference of over 5% between declared and actual investment cost, will have to amend their power purchase contracts and accept new feed-in tariffs, individually set by the regulator, the draft bill envisages. Moreover, these plants will have to pay back to NEK the difference between the feed-in tariff received so far and the individually set new feed-in tariff.
The draft bill is still early in the legislation process, having to pass two votes in a plenary session and get signed by the President before it enters into force.
Even so, it has made industry associations and diplomatic missions express concern over the retroactive measures that they say jeopardize renewable energy sector in the country.
In an open letter to the government, renewable energy industry associations recalled that two similar moves have already been revoked by court. A "temporary grid-access fee" taking up to 39% of the income of renewable energy producers was introduced September 2012 and revoked by court the next year. A 20% fee on income of wind and solar power producers introduced at the beginning of 2014 was again revoked by court seven months later.
Direct renewable energy investment tops 4.5 billion euro ($4.9 billion), the associations said. About 2.5 billion euro was financed by Bulgarian banks and 2 billion euro represent foreign direct investments.
"We are gravely concerned about the imposition of retroactive measures against energy producers, particularly producers of renewable energy", a letter, signed by the heads of diplomatic missions of USA, Korea and Italy, reads.
The diplomats noted that the proposed retroactive measures will further aggravate the negative climate for renewables investment created over the last three years, when similar actions were undertaken and eventually revoked by court. They urged the government to reject the proposed legislation.