After power cuts hit the Bulgarian Black Sea coast in July and August at the height of the tourist season, the country's utilities regulator blamed electricity distribution companies for not doing enough to prevent the overloading of the power grid, but on August 31, the chairperson of the State Energy and Water Regulatory Commission (SEWRC) Angel Semerdjiev conceded that state utility NEK, whose subsidiary operates the grid, had its share of the blame.

The utility company routinely re-allocated funds from grid maintenance to investment in new electricity production capacities, something that SEWRC has been aware of for more than a year, Semerdjiev said.

This re-routing of funds had not been approved by the regulator, but NEK has been operating, apparently, under a business plan that had been approved by its parent company, the Bulgarian Energy Holding (BEH), and the Economy Ministry, the sole shareholder in BEH, but not by SEWRC.

"It is most distressing that the focus of investment programmes was creating new production capacities, under a business plan not approved by SEWRC at that, and not investment in the grid," Semerdjiev was quoted as saying by news website Mediapool.

A regulator probe underway at NEK sought to clarify the details of NEK's investment policy over the past three years to find out whether the development of new capacities came at the expense of grid maintenance, but this investigation had not yet been completed, he said.

Even though the regulator did not in the past approve the utility's business plans, it routinely accepted NEK's demands for price increases that were being justified by the need for more funds for grid maintenance.

The funds were redirected primarily to two projects: the construction of the Belene nuclear power plant, which Mediapool extimated at two billion leva at the time that work was shelved in 2009 until a new strategic investor could be found, and the Tsankov Kamuk hydro-power array, completion of which has been delayed several times.

It was unclear whether the regulator saw NEK's re-routing of funds as abusing its position and whether the state-owned utility would be fined. Three electricity distribution utilities – owned by Czech CEZ, Austria's EVN and Germany's E.ON – have been the target of similar regulatory probes and were deemed guilty of outsourcing too many activities to subsidiaries, which could result in fines for the companies.

At the time that the findings were made public in July, critics suggested that the private distribution companies were being made into scapegoats to distract public attention from the troubles of NEK, which owns the power grid and the company that operates the grid. NEK was allowed to increase its prices by seven per cent starting July 1.

The regulator asked NEK for a new business plan that had to fully meet the requirements of the utility's operation licence, as well as outline its future development in a 10-year business plan. "One of the least certain elements of the 10-year business plan is the construction of the Belene nuclear station, which is why several options are being drafted," Semerdjiev said.

In addition to the uncertainty of finding new investors, Belene was being hamstrung by continued negotiations between Bulgaria and Russia's Atomstroyexport, which, citing inflation, has asked for a large upward revision of the fixed price of four billion euro, at which it was contracted to build the two 1000MW reactors.

The first major power grid failure of this summer happened on July 22, affecting subscribers both to EVN and E.ON in Byala, Dolen Chiflik and Shkorpilovtsi, and the summer resorts of Sunny Beach, Pomorie, Ravda, Nessebur, Sveti Vlas and Obzor. In this case, at least part of the reason could have been sabotage or theft of cables.

The problem continued with outages as the electricity supply system became over-burdened, aggravated by the scorching heat at the Black Sea in the first fortnight of August. Sveti Vlas, Sunny Beach, Sozopol and nearby campsite Gradina were among places left without electricity for hours.