The Association of Industrial Capital in Bulgaria (AIKB), the Bulgarian Chamber of Commerce (BCC), the Bulgarian Chamber of Commerce and Industry (BCCI) and the Confederation of Employers and Industrialists in Bulgaria (KRIB) welcome greater transparency in the work of the Commission for Energy and Water Regulation (KEVR) through the publication of the applications for new prices of the energy companies for the period 01.7.2015-30.06.2016, as well as the report for the "Electricity" sector.
In connection with the proposed new electricity prices, we express the following opinion:
Regulated prices: KEVR continues the previous wrong practice of subsidizing households from Bulgarian businesses. Low-voltage non-domestic consumers will buy 40% more expensive energy than households. We object to this approach as it distorts market relations, pursues pseudo-social goals and essentially renders household energy efficiency policies meaningless.
Free market: With the changes in the Energy Law in March 2015, a commitment was made to reduce the price burdens that the Bulgarian industry bears. Instead, KEVR "surprised" the industry with a more than doubled price supplement "obligations to society" (from BGN 18 to BGN 40/MWh). This leads to a jump in prices for high voltage consumers by 20%, and prices for medium voltage - by 15%. We categorically do not accept the proposed increase! The sharp deterioration in the price positions of practically all industrial sectors in the economy will directly lead to a loss of market positions, a collapse in exports, loss of jobs and a sharp limitation of investment activity. At the same time, energy for export continues to be exempt from the "liability to society" component.
NEC's deficits: NEC's price statement reports an additional accumulated deficit of BGN 1 million due to regulatory decisions from a year ago. This new deficit represents a huge risk not only for energy, but also for the entire economy. It is the responsibility of KEVR to propose measures to solve it urgently, but through equity and debt instruments and through reforms and restructuring, not through increasing prices for businesses. In parallel with this, the uninterrupted purchase of subsidized energy from all possible producers continues, despite the commitments made.
Cost-covering approach: KEVR continues to use the vicious cost-covering approach and set individual prices for each energy company based on its claimed costs. It is not the reduction that is stimulated, but the "justification" of ever-increasing costs. Thus, inefficiencies in the energy system grow and, instead of being penalized, are calculated into the prices. The same unacceptable approach has been applied to the "price for an obligation to society" model - it is a direct market-unfounded redistributive measure to seize a financial resource from market-functioning enterprises and accumulate it for non-competitive and non-market-operating enterprises.
Purchase of electricity from the public supplier: The main reason for the creation and maintenance of structural imbalances and financial deficits in the Bulgarian energy sector is that, instead of at a market price, the public supplier buys electricity from renewable sources at non-market prices (according to Article 94 of the Law for energy) and on the long-term contracts for the purchase of electric energy (DDIEE). The agreements reached under the DDIEE of 08.04.2015/XNUMX/XNUMX on the change in prices for availability are a good, but small and insufficient step in this direction. We insist on finding a sustainable and market-based solution to this problem.
New market model: The lack of competition between energy producers largely renders liberalization efforts meaningless. The state companies of the Bulgarian Energy Holding group offer more than 90% of the energy for the so-called free market. Without decisive structural reforms and changes to market rules, consumer benefits – predictable and fair prices and reliable supply – cannot be expected. Efforts towards the creation of an electricity exchange would be useful only if they are part of a well-thought-out and implemented new market model, until the implementation of which there should be no increase in prices for end customers on the free market in the "Electricity" sector.
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