SOFIA SET TO DECIDE FATE OF FOREIGN ELECTRICITY COMPANIES

The case hinges on a payment dispute between the distributors – Austria’s EVN and the Czech companies CEZ and Energo-Pro – and Bulgaria’s state electricity company, NEK, with each side claiming to be owed money by the other.

The European Commission, the EU’s executive arm, and six EU nations have complained to Bulgaria about its handling of the case, which is being viewed as a test of the rule of law in the bloc’s poorest member state.

The case is also being watched as a barometer of Russian influence amid concerns that local businessmen with Russian backing have been lobbying to build stakes in the grid business if the foreign investors are stripped of their licences.

Bulgaria is already faces scrutiny over possible moves to give special treatment to a Russian natural gas pipeline at a time when the west and Russia are in conflict over the Ukraine crisis.

The South Stream pipeline, developed by Russia’s Gazprom, would carry Russian gas across the Black Sea and through the Balkans to Austria – bypassing Ukraine – and has been a strategic priority for Moscow. The Commission has threatened legal action if the Bulgarian parliament amends the national energy law to exempt a portion of South Stream from EU competition rules.

Ognyan Minchev, director of Sofia’s Institute for Regional and International Studies, noted that Russian influence was a factor in both cases, and was often exercised through local media controlled by Bulgarians with close ties to Russia.

“The Russian influence is universal in energy,” Mr Minchev said.

The Bulgarian regulator is expected to deliver its verdict in the electricity case in a matter of days. In the meantime, it threatened on Wednesday to impose fines of at least Lv50m ($35m) against the companies for 2,690 other infringements.

NEK says it is owed Lv347.6m ($244m) by the distributors, which have ceased paying for electricity. The companies, in turn, argue they are not paying because they are owed a greater sum by NEK for surplus renewable electricity they were forced to buy. The money owed to the utilities by NEK was confirmed by Bulgaria’s supreme administrative court last year.

Günther Oettinger, the EU’s energy commissioner, has said the dispute over payments should be settled in a commercial court rather than a ruling by a regulator that is seen as politicised.

“My services . . . will take the necessary legal steps, if necessary, to ensure full compliance with EU law,” he wrote in a letter to Bulgaria’s energy minister seen by the Financial Times.

The German, French, Austrian, Czech, Danish and Finnish ambassadors in Sofia have also written to Plamen Oresharski, the Bulgarian prime minister, warning that revoking the licences would “send a most negative signal to all existing and future investors in Bulgaria”.

Mr Oresharski insists that Bulgaria is simply applying its laws and denies accusations of pressing the regulator; but the country’s media are styling a verdict on licences as a potential vote-winner for his socialist party ahead of this month’s European elections.

Electricity prices are an explosive political issue in Bulgaria and last year helped topple the government of Boyko Borisov, the previous prime minister.

Bulgarians across the political spectrum are critical of the foreign companies, saying that they held back investment and abused their position as regional monopolies. The companies deny the charges and say that their operations are restricted by Bulgaria’s regulated market.

The case has obscured systemic failings in the Bulgarian electrical network, partly stemming from delays rebuilding nuclear capacity after reactors were shut down as a condition of joining the EU. The utilities’ case has also been exacerbated by politically-mandated price cuts and a rush for renewables.