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30 June 2020

Energy: Bulgaria introduces licensing regime for natural gas traders

With a last-minute amendment of the Bulgarian Energy Act of 26 June 2020, natural gas trading becomes an activity subject to licensing by the Energy and Water Regulatory Commission (the "Energy Commission").

Currently, traders of natural gas may freely trade on the Bulgarian gas exchange or over-the-counter without a licence. As of 1 October 2021, natural gas trading may be performed only by licensed traders. For that purpose, as of 1 January 2021, traders may submit applications for a licence to the Energy Commission and follow a special licensing procedure.

The licensing procedure is set in an ordinance for licensing activities in the energy sector. Generally, a licence may be obtained by an entity that is registered under the Bulgarian Commercial Act or has an equivalent registration in another EU Member State. In addition, natural gas traders must meet certain technical, financial, material, human resources and organisational criteria. For example, applicants must submit a business plan and information about previous experience in the field and the qualifications of their personnel to the Energy Commission. By law the entire licensing procedure should take up to three months, but in practice it may take as long as six months.

The licence may be issued for up to 35 years. The Energy Commission determines the exact term depending on the assets and the financial status of the applicant.

The licence is connected with additional expenses for natural gas traders. Traders will have to pay certain fees to the Energy Commission:

  1. For review of the licence application – EUR 500;
  2. Initial fee upon obtaining the licence – EUR 7,500;
  3. Annual fee – EUR 1,000 plus 0.055 % of the company's annual revenue from the licensed activity.

Prior to this amendment of the Energy Act, Bulgaria had some of the loosest regulatory and administrative requirements to enter and trade on the gas wholesale market. More information on the existing administrative and regulatory requirements to enter and trade on the EU wholesale gas markets can be found in a recent study entitled Upgrading the Gas Market that Schoenherr prepared in a consortium with other leading advisors for the European Commission, Directorate General Energy.