The analysis presented describes the main challenges and status of the energy sector in Bulgaria. Bulgaria's energy markets remain highly captive by monopolies at all levels. Prices are adjusted based on reference values or formulas, which is a sign of very low levels of competition in the energy sector. In 2008 the Bulgarian government proposed a draft of a new Energy Strategy, which recommends sustainable development, competitive markets, energy security through diversification and development of renewable energy sources. The draft strategy does not provide a sound basis for the ongoing energy policy and it was not adopted by the National Assembly.