How different it is to represent a Ministry instead of a State Agency, and what has changed?
Very different. The status and the position of the institution is different because the Minister is a member of the Cabinet, and from that point of view it means that the energy sector is represented at every meeting of the Cabinet. Now the leading person of the energy sector is participating in the most important decisions for the country. That personal contact is very important, due also to the many questions or strategic issues that have to be addressed and have to be solved in the energy sector. It also means that the understanding of the Cabinet is better, because they have direct contact with the person in charge. Of course this means as well much higher responsibility, but moreover it is underlining the importance of the sector for the economy of the country. This gives more transparency in the work of the Ministry because, in the arrangement of the government, the Ministers are under the control of the parliament. I mean that the parliament can ask any question related to the development of the sector. From this standpoint, the work of the Minister is highlighting in front of the parliament the transparency of the work of the sector towards the society.
What has changed? We combine now two bodies that make our work policies. One was the Agency on Energy and Energy Resources and the other was the Energy Efficiency. This is since our understanding is that energy is an integral thing. We cannot have one policy for the supply side and another policy for the demand side. The supply side and the demand one are the two sides of the same coin. That is why I think the Ministry itself should have that structure now, to accomplish a much more efficient energy policy, which is market oriented towards the customers, taking into account efficiency of the system, efficiency of the energy sector - the infrastructure, which is giving blood to the economy.
What will you highlight in the legislative schedule of the government towards the energy sector?
You may know that our first task as an Agency was the management of the Agency. My personal appointment came late August last year. At that time, we had several things in front of us. One of the first things was to read the amendments of the Energy law. We have a relatively new Energy law from 1998. In the period of the implementation of this law some issues were found, and we realized we needed to amend that law. We prepared the amendments, which were voted by the parliament at the end of last year, and one of the key actions was to strengthen the market regulations of the energy sector. Today, we have two major bodies in the energy sector - the Ministry, which is the policy maker, and the State Energy Regulatory Commission, which is the market regulator in the energy sector. With those amendments we strengthened their position, their financial independency, and we helped them to work more efficiently in the future. This market regulator has the task to issue licenses in the energy sector. The other major regulatory task is to be a price regulator in the energy sector.
Who should be in charge of the pricing structure?
The tasks and responsibilities for price regulation are given now to the independent State Energy and Regulatory Commission. They are facing their work on the provisions of the law and in addition they are preparing now price regulations for the different types of energy products. These are electricity, gas, heat, etc. which are regulated. In Bulgaria the coal prices and the rest energy products prices have been liberalized for several years. From the beginning of this year the Regulatory Commission is responsible for the pricing…
… That means that the strategy to liberalize the market is already done?
It depends on what you mean by "strategy for liberalizing the market": the legislative framework? the price policy?… Yes, from that point of view I think we created good enough modern legislative bases. In addition, we are giving a clear signal for price policy. The rules for the price policy are clear. We think this is attractive for foreign investors coming to Bulgaria. But let me answer to your previous question. What we are foreseeing for this year is that we are preparing a strategic paper that could be called "The Green Paper" or "The White Paper". We will present that paper to the Council of Ministers at the end of this month. Later on, we will discuss broadly in the society that policy paper. By society I mean all the economic and social partners. We will finalize that policy paper around March, after all those discussions. This policy paper is really looking to create a frame for mid term policy with projections in a longer-term view, because the energy sector is capital-intensive sector and not so vulnerable. That is why we need a long-term view. The stress that we want to put in the policy paper is on those three things: economic, efficiency and environment, and what kind of legal, economic framework we will offer for the business to develop in the future.
What measures are you taking to diversify your energy resources?
The electricity system in Bulgaria is based on three levels. We have relatively poor resources. However, they are very important to us. There are lignite coals in the Southeast of Bulgaria and on the base of the lignite coals we are producing about 40% of the electricity in the country. In addition we have one other chance, which is nuclear, producing somewhere about 40% of the electricity in the country. We have a capacity of 20% in our hydro power plants, which are producing 7% to 8% of the electricity in the nation. We have one additional important source, which are the plants placed on important coals. From that point of view the fuel mix is diversified in the country. We are using the benefits and the different pills in the fuel mix. We try to assure that this fuel mix under its future development has to have two main goals: to assure the security of the supply in the country, and to assure reliable power supply of the country. I also have to mention that we use gas as fuel for co-generation, but this is mainly linked to the heat supply. However, many of the district-heating plants are co-generation plants and they are producing combined heat and power most of them based on gas. We do not rely on oil. The oil has the smallest portion in the fuel mix. There are just self-producers, which are using oil as fuel. This is mainly the refinery, which is a private one - LukOil.
Nuclear power as in many European countries is a sensitive issue. What is the current state of the reactors in Kozlodui?
At the moment in the Nuclear Power Plant (NPP) we have six reactors. This is not very well understood. The first three units are VVR 440. The model 230 are Pressurized Water Reactors, (PWR). These are the most disseminated type of reactors in the world. We have two additional units - number three and number four. They are VVR 440, again PWR, but with a more advanced design than the first two units. We have two units of 1000 MWT each, which are VVR 1000. They are third generation, if I can call them like this, of Russian designed, which are also PWR.
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This means that the whole capacity of the NPP is 3760 MWT. This is 30% of the installed capacity, which is producing more than 40% of the energy in the country. Even thanks to the reliability of the coal supply in the winter time, and specifically in such a sever winter as this year's, which we did not have for more than fifty years, the NPP is producing around 55% of the electricity in the winter time. The average annual production is 40% - 43%.
What do you expect from the privatizations of the National Electricity Company (NEK) and Bulgargas?
They are state owned companies created under the trade law. Under the Bulgarian Constitution property - state or private is equal. From this angle, I cannot make a difference. Today NEK is not the electricity company that we had two years ago. Today NEK is just the transmission system operator, the dispatcher of electricity and the wholesale trader of electricity. Two years ago we had a vertically integrated company. Out of it today we have fourteen companies. One of them is NEK as a transmission system and operator. We have seven legally separated distribution companies. We have six generation companies, which are six separate plants. Looking to the privatization within the electricity sector, we consider the privatization of the distribution companies as a first need. This is because we are looking at privatization as a powerful tool for better efficiency, better management, providing better quality of services to the customers. The distribution companies are in touch with most of the customers. By privatizing those companies we are looking towards improving the final service to the customers…
What about Bulgargas?
Today Bulgargas is still vertically integrated. Within the company it has separate accountancy for the different activities, which the company is controlling. This means that we have separate accountancy for the transit, transmission of high-pressure gas, distribution - low-pressure gas, and storage of gas. From that point of view Bulgargas is operating well. We are discussing now what the next step is - should we move to unbundling the company or do we have to think to manage the company in an integrated way - private or state owned? We have one supplier of gas, which is linked with our vision for the future of the company. Also there is a long-term contract between Gasprom and its customers, which have to be taken into account. There are several approaches used in Western Europe to liberalize that market. We are looking what kind of practices we could apply ourselves.
What measures are being adopted in order to develop alternative sources of energy?
That is extremely important for us. One of the major reserves of our energy sources is the energy efficiency, because with the rise of the prices we have to offer to our customers better services and better efficiency, to give them the opportunity to balance their bills. The bill has two components here: the price and the advantage. From that point of view we are going to implement an intensive and practical energy efficiency policy.
As to your question for the renewable sources of energy, I think that in Bulgaria we have interesting projects. They can be implemented in the field of using biomass and geo thermal energy. There are also areas where wind energy plants could be well placed. There is also something very interesting, we are looking for an integrated approach to develop an irrigation and water supply system to combine them with micro hydro power plants. From that point of view the legal frame is giving a preferential regime for buying electricity, produced by renewable resources.
How are the negotiations going with Russia about the removing of spent nuclear fuel, and with other foreign suppliers of fresh nuclear fuel?
For several years we have been operating under contract with Russia for the spent nuclear fuel. Up to 1989, Russia was taking the spent fuel back, but they stopped in 1989. Now this is based on a commercial contract. The long-term strategy of Bulgaria in managing backhand of the fuel cycle is to have intern storages in Bulgaria. We will extend those intern storages. The option for the disposal of that fuel is still open in many countries. Some people are telling me: "If you solve that problem, you will be the first". That is why the option is open and we are looking for direct disposal and we are looking for some back to Russia…
What is the potential for foreign investors in the energy sector in Bulgaria?
I think there is a huge potential. I already mentioned several areas, as one of the most important is the energy efficiency. I would like this year to be "The year of the customer of energy in Bulgaria". In addition, we are seeking sever competition in the privatization of the distribution companies. Also the investment climate to invest in co-generation on existing sights is very favorable for many investors. We are looking for privatizing those companies, so the investors are welcome. As a next step we are looking to privatize the generation.
Considering Bulgaria's unique geographical position, is there any project to build a pipeline?
We have a specific position as we are between Asia and Europe. From that approach, if you look at the structure of our electricity and gas system, we are the distribution place of the flows in that subsystem. For example, I can say that the Bulgarian electricity system is the backbone of the region, because we are working in a synchronized way with Romania, a very important partner for us, with Serbia, Macedonia, Montenegro, Albania, Greece and some parts of Turkey. These days we are covering about 45% of the deficit in the region.
The gas sector is also with such characteristics. We are transiting gas to Turkey, Greece, Macedonia and in future possibly to Serbia. In addition there are European projects, which are seen as competitive transport. One of them is from the Bourgas port to the border with Alexandropoulis. And there is another good idea, which is from Bourgas to Vlora, Albania. This project is known as AMBO.
Who do you work with in these projects?
For the Bourgas - Alexandropoulis Project, there are three sides: the supplying companies coming from the sources supply, mainly Russia; the government of Bulgaria, and the Greek government. There are also commercial entities in the project. And, the Bourgas - Vlora Project is merely private, coming from a US business.
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