By unwritten tradition early June is the most „energized“ period for energy companies in Bulgaria. Then the State Energy and Water Regulatory Commission enters in the role of arbitrator and decides on which players in the chain production-transmission-distribution what charges may determine in the new twelve-month period. This year, however, things are quite different, as from 1 June the liberalization of the market began, which significantly changes the status quo. According to the National Electricity Company (NEK) and three distribution companies – CEZ, EVN and Energo Pro are already running an active process of transition of companies using low voltage current from regulated to freely negotiated prices. So in the new period (July 1, 2014 – June 30, 2015) the energy that will be needed to ensure the consumption at the regulated market is expected to decline by 26 percent to 16.22 million MWh. All this comes amid a decline in the consumption of electricity both for industry, and for the end customers, which is expected to total about 9 percent.
In this complex environment, the energy regulator held last week an open meeting to discuss the rates of energy companies. It again became evident that although some steps in the right direction were taken, the populism in actions continues to prevail over rational assessment of the situation. And all players will have to be sacrificed for the sake of stability of the NEK, which according to the unofficial information for 2013 generated a loss of over 300 million levs.
The state company has had 87,172 million levs recognized for unpaid capacity under long-term agreements with TPP Maritza East 1 and Maritsa Iztok 3 in the first six months of last year, and the half of 2013, while another 34.36 million levs were recognized for the time from 1 August 2013 to 30 June 2014. The regulator has accepted further 72.4 million levs energy costs of Chaira power plant which balances the energy system of the country. Part of this amount, 43.7 million levs, will be compensated in the new pricing period, and the rest will remain for the next period. Ultimately, the price at which NEK will sell electricity to distribution companies through the so-called energy mix increased from 100 to 110.58 levs per megawatt hour.
„This rate correctly reflects part of the operating costs of the company. There is a price increase at which NEC will sell on the regulated market by 10%, another positive thing is the recognition of the costs that we have done in previous periods to buy capacity from TPP Maritsa East 1 and 3,“ said deputy CEO of NEK Peter Iliev.
Electricity distributors have nothing to be pleased with. As of 1 July CEZ will sell energy to its customers at a price by an average of only 0.3 % increase while EVN and Energo Pro will be forced to bring down their tariffs – by 1.3 and 1.17 percent respectively. Their technological costs remain at the level of 8 percent, and separately the rate of their return from 3 to 2 per cent is reduced. At the heart of the cuts for EDCs stay the audit report released on May 12, which highlighted a number of violations there.
The manager of Energo Pro Stefan Abadjiev directly said that if these tariffs come into force, they will have dramatic financial consequences for the company as it will lead to further losses of 63 million levs.
In its current report, the pricing regulator actually recognizes that there is a problem with unpaid expenses, totaling 410.6 million levs. Of these, 54.7 million levs must go to NEK, 61 million levs – to CEZ, 46.3 million lev – to Energo Pro and the remaining, more than 248 million levs, to EVN. But the solution of this problem is covered with fog, and there is only the vague mentioning that in the next price period will what can be compensated is only 79.48 million levs.
The feeling remains that at the moment the energy regulator plays Russian roulette with accumulated huge deficits in energy sector, relying on that in the future some 541 million lev in costs could be compensated by NEK. That could happen by reducing 50% of the amount of the average duration of work of wind and photovoltaic plants. Portion of the energy produced there will be purchased at preferential prices at the discretion of the regulator and the remainder will be valued far cheaper. Regulator even proposed to the Minister of Economy and Energy to take legislative changes in this area.
The BANKER
