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Bulgaria’s business is dissatisfied with the compensations for electricity price hikes

Photo: BGNES

The price of electricity sold on the independent energy exchange has skyrocketed in recent months. In the beginning of 2022, the average price of electricity in Bulgaria amounts to EUR 131.95 per megawatt, whereas in July last year it was to the tune of EUR 95 per megawatt. However, between July 2021 and January 2022, the price of electricity has fluctuated and at times, it exceeded EUR 300 per megawatt. The abovementioned price increase has not affected Bulgaria’s households yet, because in December 2021, this country’s National Assembly decided to impose a moratorium on the prices of electricity and central heating until March 2022. According to many energy experts, this is a typical non-market behavior and consumers will pay the price later. The shortcomings of the Parliament’s decision to freeze the prices of electricity will be noticed in the coming weeks and months, the Chairperson of the Energy and Water Regulatory Commission Ivan Ivanov said. Ivan Ivanov expects from the European Commission to comment on the actions of Bulgaria’s authorities. He also called on Bulgaria’s Prime Minister to respect the decisions of the independent regulator. Premier Kiril Petkov himself admits that the moratorium on the electricity for households is not the best decision and that the authorities may revise it before the deadline. Meanwhile, Bulgaria’s business buys electricity from the free energy market whose price has hit record highs- EUR 180-250 per megawatt. Most enterprises signed business contracts when electricity prices were much lower and now they are incurring losses, Ivaylo Naydenov, Executive Director of the Bulgarian Federation of Industrial Energy Consumers (BFIEC) said in an interview for Bulgaria ON AIR.

In general, Bulgaria produces and exports enough electricity. Moreover, the price of electricity produced in the nuclear power plant in Kozloduy and the coal-fired power stations, which use local coal, is quite low. However, a number of small and medium-sized enterprises have been affected by the high electricity price, as they buy expensive electricity from the free energy market. That is why businesses are demanding state compensations. This country’s Ministry of Energy is planning to set aside EUR 767 million for businesses to partly offset the impact of high electricity prices. According to the ministry’s proposal, businesses would receive 75% of the difference between the base price of EUR 95 per megawatt and the average monthly price at the power exchange day-ahead market for the respective month, but no more than 30% of the market price. “This is a huge financial resource, which will be invested to prevent shocks stemming from high energy prices. We know that many businesses are struggling to cover their energy costs and that power distribution companies in Bulgaria are also experiencing financial difficulties, which may affect the electricity prices for households”, Premier Kiril Petkov said.

At a special meeting hosted by this country’s head of state Rumen Radev, businesses contended that the financial assistance provided by the state is not enough and may lead to sharp economic decline, social tensions and rise in unemployment. According to the employers’ organizations, the proposed compensation cap of 30% of the actual market price makes this measure inefficient. According to the Chairman of the National Assembly Committee on Budget and Finance Lyubomir Karimansky, the compensation cap could be lifted to 35%. The decision will be taken at an expert meeting.

So far, businesses are not satisfied with the state decisions. “This means closure of companies, loss of income, loss of competitiveness, etc. In other words, the economic situation is expected to worsen as compared to the past 10 years”, Krassen Stanchev from the Institute for Market Economics said. So far, only the power plants, the Bulgarian Energy Holding and the National Electric Company seem to be satisfied with the current situation, as they have accumulated unprecedented profits stemming from the high electricity prices. According to the employers’ organizations, the authorities can use these profits to compensate businesses for high electricity prices.

English version: Kostadin Atanasov

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