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Businesses blame renewables for power price hike

Published

August 3, 2015

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Published:

August 3, 2015

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Bulgarian energy watchdog head Ivan Ivanov said he wouldn’t step down after nationwide protests and calls by employers’ unions for his resignation over a hike in power prices for industrial consumers. Ivanov insisted that the Commission for Energy and Water Regulation (KEVR) adopted a “transparent, fair and public decision” on July 31, cutting rates for households by 0.11% on average, Novinite news agency said. Trade unions also staged protests, warning that the hike will result in thousands of jobs being cut and tremendous losses for industries.

In his words, KEVR will not defend “corporate interests” voiced by “a certain part of consumers”. Despite admitting the new surcharge for businesses is high, he has insisted there is no other option to tackle financial imbalances generated by the state-owned National Electricity Company (NEK). “Businesses, where they are upright, are not to blame, but I am now posing the other question: how can citizens be to blame for the huge deficit?” he was cited by Novinite.com. Ivanov said electricity costs for bread producers are 5% of the total, meaning that bread prices go up by 3.89 euro cents. The chair of KEVR reminded that the price of natural gas had dropped by a total of 20% and that the previous increase in electricity prices had seen household tariffs go up by 10% and industry tariffs by 1%. Ivanov argued that the business sector had received preferential treatment for two years.

The hike was largely caused by setting the so-called “obligation to society fee” for most consumers to BGN 38 (EUR 19.43) per MWh. Households used to pay EUR 27.1, while businesses had been charged EUR 10.19. Energy minister Temenuzhka Petkova made clear that energy-intensive companies would be entitled to discounts of 50-85% of the component, depending on their power consumption. She said state-owned companies in the sector will be able to save EUR 10.23 million this year. Petkova reminded of the government’s commitment to cut the segment’s expenditures by 10% every year until 2017. The cabinet had taken steps to reduce the burden on industries which buy energy from renewable sources at preferential, high prices, she added. In her words, the measure was pending approval from the European Commission. Bulgaria is trying to cut the EUR 1.89 billion deficit piled up by the state-owned utility NEK (Natsionalna Elektricheska Kompania EAD).

Prime minister Boyko Borisov said a new special unit of prosecutors and counter-intelligence and security officials would oversee the energy sector, due to of lack of control over invoices between renewable energy producers and regional power distributions, Energy World magazine reported.

At a meeting on August 2, employers said they would go on with their protest and take to the streets again in September if the measure is not reversed. Vasil Velev, Chairperson of the Association of Industrial Capital in Bulgaria, said it was “mere myth” the households were paying the disputed fee. Attempt by the state to establish another monopoly in the energy sector is inexplicable, said Mariyana Kukusheva from the association of bakers and confectioners, speaking for Focus news agency. Energy from renewable sources should be in the free energy market, she stated and added the standard of living is dropping as well as consumption.

On July 22 the parliament passed amendments to the Energy Law envisioning the creation of a fund to cover NEK’s deficit, the Sofia Globe reported. All electricity producers and importers are required to pay 5% of revenues monthly for system security. The fund is to be managed by a board headed by a person appointed by the Energy Ministry. Several attempts to draft a compensation mechanism by either reducing the subsidy for renewables or generating additional revenue have all failed, while the regulator has balked at the prospect of raising consumer prices to fully factor the drastic increase in electricity generated from renewable sources, because of the expected consumer backlash, such as the street protests that brought down the previous government of prime minister Borissov in February 2013, the report said. The creation of the energy security system fund is the first step towards liberalization of the energy market, energy minister Petkova stated at the parliament.

The ambassadors of Italy, South Korea and the United States had opposed the set of amendments in a letter to Borisov and Petkova during the procedure in the parliament. “Hundreds of millions of euro was invested in the Bulgarian economy in the form of renewable energy projects built by investors from our countries,” the envoys stressed, adding that green energy contributed to energy security. The diplomats claim the assumption that renewable energy producers have been granted too many preferences is a misunderstanding. They pointed out that a large part of the investors have not received dividends. They reminded that retroactively applied measures have been blocked by court before.

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