Bulgaria utilities regulator pleads case for electricity price hike

Written by on June 24, 2015 in Bulgaria - Comments Off on Bulgaria utilities regulator pleads case for electricity price hike

The head of Bulgaria’s utilities regulator told MPs on June 24 that implementing the changed pricing formula proposed by the Energy and Water Regulatory Commission (EWRC) would balance the books at state-owned electric utility NEK, but did not rule out a one-month delay in the implementation of the price hike.

Ivan Ivanov, appointed earlier this year following the latest legislative amendments to shake-up the regulator’s line-up, said that the EWRC’s proposal would create savings and additional revenue worth a total of 702 million leva over the next regulatory period between July 1 and June 30 2016.

The figure was larger than the 644 million leva current deficit posted by NEK, meaning that the state utility would stop accumulating debt, which Ivanov estimated at 3.3 billion leva. Separately NEK owed a further 2.3 billion leva for two major investment projects, the Tsankov Kamuk hydro-power array and the cancelled Belene nuclear power plant.

Earlier this week, Ivanov said that the regulator would decide on June 26 whether to postpone the introduction of its new pricing formula by one month, as asked by the Cabinet. A parliamentary committee approved on June 24 amendments that would give the regulator this option, with a vote on the House floor expected on June 25.

But Ivanov also cautioned that any delays would only worsen NEK’s financial situation, while there was no guarantee that the one month’s delay would be sufficient to find the necessary wiggle room to diminish the impact of the price changes.

EWRC’s new pricing formula envisions an electricity price hike of between 1.5 per cent and 3.6 per cent for household consumers, but is opposed by large-scale industrial consumers. The regulator’s package envisions a sharp hike in the “social responsibility” fee paid by such consumers – a fee introduced in 2013 to replace renewable energy and power grid loss surcharges – from 18.9 leva/MWh to 40.2 leva/MWh, which would result in a 20 per cent hike in the electricity bills paid by industrial consumers, according to the estimates from the companies affected by it.

According to MP Valentin Nikolov from GERB, the majority partner in the ruling coalition, the one-month delay would give the Cabinet more time to amend planned regulations that would reduce the impact of the “social responsibility” fee hike on industrial consumers, while also giving government inspectors more time to finish a review of the renewable energy sector, Bulgarian National Radio reported.

The sharp increase in the number of renewable energy producers over the past several years, spurred by the generous feed-in tariff approved by the government, is often blamed for the poor state of NEK’s finances because the state utility is required by law to buy all such electricity despite it being more expensive than electricity from older coal-powered plants.

Long-term contracts with two modernised power plants owned by private US investors are another reason that is routinely invoked, although those prices are slated to go down soon after an agreement was reached between NEK and the owners of the two plants earlier this year.

 

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