The attempt of the State Energy and Water Regulatory Commission (SEWRC) to reduce electricity prices for households by the new pricing model was subjected to withering criticism. During the public hearings last week there were objections from all participants in the chain: production – transmission – distribution.
Most extreme in their statements were the representatives of the electricity distribution companies that were most affected by the measures of the regulator. They objected to the reduction of recognized costs to cover losses in the transmission network, since this is to reduce their investments in the power network and replacement of electricity meters. Therefore, CEZ, EVN and Energy Pro will not be able to fulfill their legal obligation to change the meters and will therefore find themselves in the absurd situation to be fined for that by the same regulator.
Mrs. Genova – Director Regulations at CEZ said that SEWRC for the second time this year has reduced their technology spending, the first was at the emergency decreasing of the price by 6-7% on March 5.
Regional manager of EVN Joerg Sollfelner pointed out that the recognized costs in the final price do not guarantee the jobs of his company’s employees. In his words, Energy sector is in the Emergency Room and a mistake by the energy regulator now will lead to a collapse of the entire system.
Most flamboyant in his speech was Stefan Abadzhiev of Energo-Pro. If the rest of the energy is in the emergency room, we’re in the Reanimation Unit he said, explaining that the decrease in the prices of 5 March delayed bonuses to workers negotiated by a collective agreement.
The situation is not the same with other energy companies. The costs of the largest producer of electricity – NPP Kozloduy are projected to be reduced to the historical low BGN0.0393 per kilowatt/hour. This, of course, would be not that problematic if the plant was not supposed to undergo a major modernization of the two 1000 MW units, which move actually will make them continue to work after their designed lifetime expires in 2019 and 2021. Now, the reduction would be at the expense of its repair programme, which in turn must be offset by depreciation reserves. These are all things that put Kozloduy NPP in a very difficult situation, although the Ministry of Economy and Energy has been silent on the issue by now.
State-owned Maritsa East 2 asked a price of BGN74.89 per megawatt/hour due to additional costs to purchase allowances to emit greenhouse gases, but will actually receive only BGN61.61. This will definitely lead to large losses from the sale on the regulated market.
It is noteworthy that there will be no change in the conditions of buying power from the U.S. TPP Maritsa East 1 and Maritsa East 3. Their long-term contracts envisage the purchase of between 82% and 85% of the power they produce and if this is not done, the said price still has to be paid. Several times during the period in office of GERB, and during the interim government, promises were given that the status quo would change. There were positive indications from the private owners of the two plants, but there has been no result so far.
Unchanged will remain also the price paid to Maritsa 3 – Dimitrovgrad, which is said to be owned by businessman Hristo Kovachky. The other plants connected to him: Bobov Dol gets a reduction in the rate of return from 13.2% to 7%. This way it ensures the purchases of nearly 1.5 million MWh of electricity plus 3.11 million megawatt hours of capacity availability.
Both Bobov Dol and Brickell will not work on the free market as urged caretaker Minister Assen Vassilev. This way citizens will actually have to pay for their electricity, as well as for the power of the long-term contracted private stations of the Maritsa East group.
The big problem remains the gap of nearly 500 million levs, which is set aside to purchase the so-called green electricity. The risk that the NEC as a public service provider takes regarding the purchase of electricity produced from renewable energy sources is considerable. Monthly the company must spend at least 50 million levs, said Damian Christov, head of pricing department within the company.
In theory, it is necessary that these funds be provided with the money from the sold state GHG allowances. But at least according to the former minister Vassilev, they can not be collected for one year. For the past few years – he said in an interview – we collected 50 million from such sales, while the preliminary (highly inflated) assessment of experts from Ministry was for 136 million. How they happen to become 498 million levs, we don’t know. And if we do not collect the money, they will paid back by the citizens through taxes.
Serious trouble emerges in the Electricity System Operator (ESO) as the regulator provides the current additions to the price of electricity to be cut by more than 20 per cent. We will bear the heaviest burden within the system. This will lead to a further loss of 38 million levs for the company,said CEO Ivo Lefterov.
It seems that the SEWRC chooses populist measures against unpopular ones and there is a real danger that the next bubble in energy may begin inflating. If it bursts, the consequences will be truly catastrophic.
