24 August 2023
The draft amendments to the Energy Act do not sufficiently protect citizens’ rights and the contested texts should be revised.
Ombudsman Diana Kovacheva sent an opinion to the Minister of Energy Rumen Radev on the draft act amending and supplementing the Energy Act, in which she strongly objects to some of the proposed changes. The main concern of Prof. Kovacheva is that the draft act provides for the first steps towards the liberalisation of the electricity market for the population from 1 January 2024, i.e. in the middle of the heating season.
It is worth recalling that at the end of 2022, the Parliament adopted a decision, with which the Council of Ministers is entrusted with the task to ensure regulated electricity prices for households at least until 1 January 2026.
“I consider the date set to be hasty and ill-considered, as it may lead to unforeseeable situations before household customers enter the free market. The planned phased liberalisation of the electricity market should not start in the middle of the winter period without a regulatory framework for the introduction of a mechanism to provide financial support to households in an energy poverty situation”, the Ombudsman writes.
According to Diana Kovacheva, if the activities of the National Electric Company EAD (NEK) are terminated as a public supplier from 1 January 2024, as the draft envisages, it may turn out that hundreds of thousands of households that are heated with electricity will not be able to pay their debts on time, which is reported as a possibility in the impact assessment.
Next, the Ombudsman strongly objects to the fixing of a minimum period of one year during which citizens are obliged to sign a contract with the chosen electricity trader.
“This deadline is in the interests of electricity traders but not of household customers, and is an obstacle to switching suppliers and to market competition”, the Ombudsman points out.
According to Prof. Kovacheva, fixing a term for the contract in the act is state interference in the free negotiation between the parties. On the other hand, Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU does not impose such a restrictive condition.
“The liberalisation of the retail electricity market does not involve legislative obstacles to switching the electricity supplier, such as the introduction of a minimum contract period,” the Ombudsman notes.
Another disadvantage of the draft act is that it provides for the criteria, conditions and procedure for determining the status of energy-poor household/s and/or vulnerable customer/s for electricity supply to be set out in an Ordinance adopted by the Council of Ministers, for which there is, however, no deadline.
“It is unacceptable that the drafting of this Ordinance should be postponed indefinitely to a future date”, says Diana Kovacheva, stressing that the six-month period provided for in the draft act only applies to the existing regulations, but not to the new Ordinance.
Another problem with the state support for people in energy poverty is the definition of a “household” as “one or more persons who live and are registered in one dwelling or part of a dwelling, have a common budget and common costs for energy consumption/and common costs for meeting other needs”.
According to the Civil Registration Act (CRA), the address registration of citizens is at their permanent or current address, and it is not necessary for these to match. The draft act does not specify which address registration is envisaged.
Prof. Kovacheva points out that Commission Implementing Regulation (EU) 2019/2181 of 16 December 2019 introduces also the concept of “usual residence”, with specific cases for its application being set out in Article 4.
“I also believe that defined in this way, the notion of “household” does not reflect the diversity of opportunities that life presents, and my concerns are that as a consequence citizens will be harmed or at least the real situation will not be reflected”, emphasises Diana Kovacheva.
The Ombudsman also strongly objects to the intention to charge a “contract termination fee” and a “switching fee” on household customers.
“There is no basis for charging a fee upon termination of a fixed-term contract at the end of its term. Moreover, the contracts for the supply of electricity should provide for penalties in case of non-compliance with the agreed conditions”, writes Prof. Diana Kovacheva.
She opposes to the charging of a switching fee as well, since under Article 12 (2) of the Directive: “Member States shall ensure that at least household customers and small enterprises are not charged any switching-related fees.”
The Ombudsman considers it a significant omission in the draft act that Article 14 of the Directive “Comparison tools” was not transposed, providing for comparison of the offers of electricity suppliers, including offers for dynamic electricity price contracts. Thus, the act does not guarantee the right of household customers to access to accurate, up-to-date and free of charge information on the offers and the tools to be offered on the retail electricity market.
With regard to the proposed amendments to the existing ban on the dismantling of radiators in dwellings, the Ombudsman proposes that this ban be dropped altogether, as it is currently not effective.
Diana Kovacheva notes as an omission that the draft act does not adddress the problem with the fair determination in the Energy Act of the amounts of thermal energy given by the building's heating installation.
“Finally, I consider it necessary to point out that the grounds for the draft act amending and supplementing the Energy Act do not meet the requirements of Article 28 (2) of the Legal Acts Act, which reads that:
“The Motives, or the report, shall contain:
1. the reasons for acceptance;
2. the goals that are set;
3. the financial and other means necessary for the implementation of the new regulation;
4. the expected results of the implementation, including financial, if any;
5. analysis for compliance with European Union law.”
The Motives do not make it clear what financial resources will be needed for the implementation of the new regulation, the expected results – such as a reduction in electricity prices under effective competition.
It is settled caselaw that failure to comply with Article 28 (1), (2) and (3) of the Legal Acts Act constitutes a serious breach of the procedure for drawing up a draft legislative act and is sufficient grounds for its annulment.
The partial preliminary impact assessment of the draft act does not provide information in compliance with the requirements of Article 16 of the Ordinance on the scope and methodology for carrying out an impact assessment for household electricity consumers regarding:
- presentation of the results of the comparison of the options for action and their potential impacts under the criteria of effectiveness, efficiency and consistency (Article 16, paragraph 6);
- information on whether the administrative burden for natural persons will increase or decrease in the implementation of the recommended option for each issue raised (Article 16, paragraph 8);
- information on whether new regulatory regimes will be created, or whether existing regimes and services are to be affected by the implementation of the recommended option for each issue raised (Article 16, paragraph 9);
- information on whether new records are created when actions are taken to implement the recommended option for each issue raised (Article 16, paragraph 10);
- information on the potential risks (price, financial, social and economic consequences on household budgets, consumer awareness, legal uncertainty, security of electricity supply, etc.) in the implementation of the recommended option for each issue raised (Article 16, paragraph 12).
“In consideration of the above, I am of the opinion that the draft act does not sufficiently protect the rights of citizens and the contested texts should be revised,” concludes the Ombudsman.