Czech power distribution company Energo-Pro announced last week it has officially informed the Bulgarian authorities about intentions to launch proceedings against the country due to the damaging pricing policy of the state energy regulator.

Energo-Pro said it wishes to settle the investment dispute voluntarily by way of mutual understanding and will initiate arbitration proceedings at the International Centre for Settlement of Investment Disputes, part of the World Bank, only if the regulator's price proposal for the coming eleven-month period (August 2013 - June 2014) is approved.

The company's statement was uploaded on its web site on Friday, July 19 - one day after the Bulgarian regulator announced its latest proposal to cut electricity prices in Bulgaria by an average of 5%.

Energo-Pro wrote that ever since the beginning of July 2012 the price decisions of the energy regulator have harmed its operation in Bulgaria. The dispute between the Czech investor and the Bulgarian authorities was sparked by the change in the mechanism for compensating the costs arising from the obligatory purchase of renewable energy, the company explained.

In addition, the regulator's policy to cut end-consumer prices by taking income away from the power distributors in the country has severely worsened their financial position, restricted their investment stimuli and forced a process of decapitalisation.

The regulator's July 18 proposal to cut electricity prices for the new price period showed that the Bulgarian authorities have ignored the power distributors' concerns and signaled that they intend to continue with a policy that threatens the distributors' financial stability, Energo-Pro said.

We note that in June 2013 Austrian energy group EVN launched proceedings at the international arbitration court against Bulgaria over the country's pricing of electricity and compensation for public obligations in respect to renewable energy.