The legal/regulatory framework for the Energy sector in Bulgaria is compliance with the European legislation, namely with Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas. These two are transposed mainly in the Energy Act ("EA"), the Act on Renewable and Alternative Energy Sources and Bio Fuels ("ARAESBF") and the Energy Efficiency Act ("EEA").  The EA regulates generation, import and export, transmission, transit transmission and distribution of electricity, heat and natural gas, oil and oil product transmission through pipelines, trade in electricity, heat and natural gas, as well as the powers of the state bodies in shaping energy policy, regulation and control.

Authorities

The State policy in the Energy Sector is assured by the Ministry of the Economy, Energy and Tourism ("MIET") and the state energy strategies are adopted by the Parliament.

The regulatory body for energy sector as well as water and sewage sector is an independent specialized state authority - State Energy and Water Regulatory Commission ("SEWRC"). SEWRC issues licenses for the various activities as well as Guidelines, Rules (Technical, Commercial and Administrative), Individual and General Administrative acts, regulating licensing activities and drafting secondary legislation statutory instruments, exercises control over the licensed companies including mergers and acquisitions, price regulation, etc.

Licensing Regimes and Price Setting

EA is stipulating the Licensing regimes in the Electricity, Gas and Water supply and sewage sectors. Subject to Licensing are:

• Electricity Generation (including RES for Hydro above 10 MW and for the rest of the sources  above 5 MW installed capacity) (Electricity and/or Heat);
• Transmission (Electricity, Heat & Natural Gas);
• Transmission System Operation (Electricity & Gas);
• Trade of Electricity, Public Provision, (Wholesale) (Electricity & Gas);
• Distribution/Distribution grid operation (Electricity & Gas);
• Public/ End Supply (Retail) (Electricity & Gas);
• Organizing of an electricity Market (Power exchange- Electricity);
• Transit transmission of natural gas, pulling power electricity distribution over the railroad transportation distribution networks.

Subject to price regulation are the following activities:

• Electricity/ Heat Generation (including Renewable Energy Sources Feed in tariffs, availability and the prices of the balancing energy);
• Heat transmission;
• Electricity Public Provision for consumers connected to the transmission network, to the distribution company, in order to cover the technological costs of transmission and to end suppliers;
• Prices at which the public provider sells natural gas to public suppliers of natural gas, to consumers connected to the natural gas transmission network and selling natural gas to end suppliers of natural gas;
• Prices at which End Suppliers sell electricity and natural gas to consumers connected to the respective distribution networks or to public suppliers and at which end suppliers sell electricity and natural gas to households consumers and companies with less than 50 employees and less than 19.5 mil. BGN annual turnover;
• Prices for transmission of electricity and natural gas to consumers through the respective transmission and/or distribution networks and for the prices of transit transmission and cross boarder transmission tariffs, respectively for connection and access to the electricity transmission and electricity distribution networks.

Trade

As of January 2007 the stakeholders in Electricity and Natural Gas markets are subject to unbundling requirements (functional and legal unbundling). Legal framework provides for full liberalization of the Electricity and Natular Gaz markets as of 1 July 2009. In practice however, only high voltage and partially middle voltage customers are participating on the free/liberalized market.

No power exchange is available but only dual contracts are concluded between generators and traders and/ or eligible customers, traders and traders and/ or traders and eligible customers. At the end of year 2009 - 76 eligible customers, 46 Traders and 8 Generators were registered. (source: Electricity system operator www.eso.bg ). As of July 01 2009 a day ahead scheduling is applied.

In 2008 the liberalized market traded wheeling volumes of electricity were 13.7 TWh out of 39 424 MWh total gross consumption and 4.5 TWh of end consumption ordered. The export in 2008 was 5407 GWh. (source Electricity system operator www.eso.bg ).