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20.12.2013 15:50
Bulgarian Energy Regulator Plans Electricity Price Cuts for Households as of Jan1
Despite the regulator’s views about the positive effects of the measure on the households, the ever growing financial gap at the state-owned National Electricity Company (NEK) seems the most likely destination of future savings in the country’s energy system
AUTHOR: Lyudmila Zlateva

  • Boian Boev takes his place at his first press conference as chairman of the Bulgarian energy regulator

Bulgaria’s State Energy and Water Regulatory Commission announced that electricity prices on the regulated market will be decreased as of January 1, 2014. Boian Boev, who headed the regulator recently after he left the CEO position at the Bulgarian Energy Holding, said during his first press conference today that the official decision for the price cuts will be announced on December 30. Public discussions of the regulator’s proposal have been scheduled between Christmas and New Year festivities, on December 27.

Mr. Boev explained that the Commission’s analyses unveiled additional reserves in the energy system allowing for the cut of daytime household electricity prices to be cut with 1 - 1.5%. Nigh time tariffs will be decreased with the staggering 10% as of Jan.1 

What is more, the fee for grid access and electricity transmission collected by the Electricity System Operator, will be decreased from its current level of BGN 12.47 (about EUR 6.23) to BGN 6.91/MWh.

“These measures are also aimed at the liberalised market, as they will open new possibilities for exporting electricity”, Boev said.

Decreasing the financial gap in the National Electricity Company

Despite the commission’s views about the positive effects of these measures, the ever growing financial gap at the state-owned National Electricity Company (NEK) seems the most likely destination of future savings in the country’s energy system.

The wholesale prices of producers for the regulated market will also be axed. Availability prices for Kozloduy NPP, Maritsa East 2 TPP and Bobov Dol TPP will be decreased with about 1.5%, while Varna TPP mainly used as a cold reserve unit will see its price cut by as much as 7%. What is more the price of electricity produced by large onsite cogen plants and heating utilities will go down with 2.5 and 4.5%, respectively, according to the particular plants’ location.

Meanwhile the National Electricity Company (NEK) will see an increase of its electricity price from the current BGN 95.85 to BGN 100.43/MWh. NEK, also known as Bulgaria’s “public provider”, is obliged to buy electricity from energy producers and then sell it to local energy utilities which then supply the customers on the domestic regulated market. The regulatory commission estimates that this move will secure additional BGN 120 million for NEK to cover its debts towards two power plants – AES Maritsa East 1 and ContourGlobal Maritsa East 3, which sell electricity at fixed prices according to their long-term contracts. Mr. Boev estimated that this additional income will also allow NEK to cover up for the decreased internal energy consumption which led to the raising of costs for balancing the energy system by pumped-storage hydro station.

Electric utilities’ limit for technical loses decreased to 8%

Electric utilities are another element that should contribute to the planned regulated market price cuts. This will be implemented through a decrease in their limit for technical loses with 2 percent, their current level being 10%. An analysis by a body of independent energy experts commissioned by the regulator showed that “utilities have a significant technical, resource and financial reserves which have not been yet been used up”. Commission member Elenko Bozhkov stated that the investment programmes of the utilities have been implemented to a greater-than-planned extent, therefore they should be able to make more cuts.

A positive outlook on CO2 trading incomes

Liliana Mladenova, who along with Boev also joined the Commission recently, highlighted these measures as a guarantee for improving the financial situation at NEK. Mladenova also denied rumours about a gaping deficit in NEK’s funds meant for buying the more expensive renewable energy. She expressed her optimism about adding further income from CO2 trading, noting however that CO2 quota are subject to market pricing and exact forecasts for months ahead are impossible.

“Currently we dispose with BGN 110 million from CO2 emissions trading and we expect that amount to grow considerably by the end of the current regulatory period [on June 30, 2014]”, Mladenova said.

What is more electric utilities managed by CEZ, EVN and Energo-Pro, as well as the smaller Golden Sands utility supplying the seaside resort of the same name, should get prepared for financial inspections, Mladenova said.

Internal electricity exchange no earlier than March 2014

The opening of a national electricity exchange planned for the beginning of 2014 will see another setback, it became clear today. Boian Boev explained that the regulator plans to issue a permit for electricity exchange operator no earlier than the end of the first quarter of 2014.

Several companies have been earmarked for assuming this role. The Bulgarian Energy Holding has set up a special company which could be competing for managing the future electricity exchange. The Electricity System Operator, subject to yet incomplete unbundling from NEK, has also been suggested as a possible market operator but later pulled back from its decision to apply for license. Last but not least, a private entity – the rather obscure Bulgarian Electricity Exchange AD, has also applied before the regulator.

A "Christmas gift" for renewable energy producers
Mr. Boev announced that the regulator plans to start paying back the amounts levied from renewable energy producers in 2012 and 2013 for the so called grid access fee, ruled out by the Supreme Administrative Court.
“This will be a sort of Christmas gift for the renewables sector”, Boev said.
A rather precarious statement of Boev's, given that in October, when he was still at the helm of the Bulgarian Energy Holding, he proposed a 30-percent levy on PV producers . Even though Boev's bold proposal did not come to life, the recently voted new fee that will take 20% of their income from regulated market sales , published in the State Gazette today, could be seen as its procreation. While this new controversial fee declared a sort of “nationalisation of private capital” by the Bulgarian Photovoltaic Association, has already been passed by the parliament, it is yet unclear how the proceedings from it will be used.
“The regulator will start discussions with the Ministry of Finance in 2014”, Boev explained, declining to comment on rumours that they will be used as energy aids for vulnerable households.

TAGS: Bulgaria | energy | electricity prices | Bulgarian Energy Holding | BEH | National Electricity Company | regulation | Boian Boev | utilities 

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