After two years of tortuous negotiations, at long last on Wednesday an agreement was signed between the National Electricity Company (NEC) and the two American owners of thermoelectric power plants in the country - AES and ContourGlobal – on amending the long-term contracts for the purchase of electric energy from them and the prices the Bulgarian state-owned company will have to pay.

In itself, this is a positive development whichever way one looks at it, but most of all because it means there will be no rise in the price of electricity any time soon. Suffice it to say that the first government of Prime Minister Boyko Borissov fell two years ago precisely because of the unaffordable price of electric energy. To this we should add the direct benefits to Bulgaria’s investment image after the successful finalization of the negotiations with our biggest partners overseas.

As of 1 July 2015, the price paid by the NEC to ContourGlobal for keeping its capacities ready, also known as price of availability will be reduced by another 17 percent, and to AES – by 14 percent. The reduction will mean direct benefits for the Bulgarian side of close to EUR 600 million over a period of ten years. In exchange, the NEC assumes the commitment to pay the debts it has accrued to the two companies running to almost EUR 365 million by the end of June, so that they on their part can pay their debts to the coal mines which supply them with fuel.

And everything would have been just wonderful and a good way of attracting more foreign investors, were it not for some “minor” details.

The end users of electric energy will gain nothing from the negotiated reduction because the prices they will have to pay are set by the Energy and Water Regulatory Commission and are formed on the basis of a complex mix of the prices of different producers including the expensive green energy sources which enjoy preferential treatment to boot. Nor does the heavily indebted NEC stand to gain anything – it is just reducing its expenditures. And this at a time when Bulgarian power generation as a whole and most of all the production and trade in electric energy is undergoing a crisis of a magnitude never seen before and is continuing to accrue mountains of debts. To top it all, in consequence of the agreement, the NEC will now have to urgently find an enormous sum of money to pay the Americans within two months. This is money the company does not have, what it does have is over EUR 1.5 million of debts. Now it will have to take out another loan which, at some point or other, it will have to pay back, plus the interest.

Most experts say that if you are selling electric energy below the cost price there is no way to avoid losses and indebtedness. But other, no less knowledgeable experts, politicians and sociologists say that more than 90 percent of Bulgarians are indigent from a West European point of view and cannot afford to pay higher electricity costs. Moreover, 2015 is a year of local elections and if they permit a rise in prices, the political class will have shot themselves in the foot. This means skating on thin ice, something that cannot go on indefinitely though at this precise moment in time, the political and social conditions are by far not propitious for the high-risk surgery that will sooner or later have to be performed. Seen from this angle, the deal with the two American power plants is profitable most of all to the political class in Bulgaria.

English version: Milena Daynova