Банкеръ Weekly

Briefs

COMMITMENTS IN ENERGY SECTOR WORRY US

The conclusions to be undoubtedly reached by the experts of the IMF successive mission, which has arrived in Bulgaria this week, will be that the Government fulfils its commitments in the energy sector, but without observing the terms and without having received the necessary public support, notwithstanding the sharp public discussions over the last few months.The first commitment is to announce a price scheme to show when and how much will electricity and central heating bills go up. But no such scheme has been made public so far. Two things are known at present - the final prices and the institution that will set them. The Government has promised that by end-2004 the price of electricity would reach USD004.5/kWh before VAT, and heating energy would cost BGN45/mWh before VAT. This means that within two years and a half the price of electricity for households will go up by almost 45 per cent, and central heating will become 33% more expensive. The State Commission for Energy Regulation (SCER) is the institution to decide when and how much the prices will be hiked. This is its right and obligation both under Bulgaria's effective legislation and according to the various agreements and memoranda, signed with the IMF and the World Bank.As the BANKER weekly has already written, the model that is being worked out by SCER's experts projects two hikes of electricty prices this year: by 10% as of July 1, 2002 and by another 5% before the beginning of the new heating season. By then higher energy allowances for the people from the lower income brackets should be provided. The same scheme will be applied in 2003 as well, and one price increase - by 10% prior the heating season - is projected for 2004. Central heating prices will be hiked by 10% during each of the years till 2004. The first price increase will be probably as of July 1, 2002.The draft for a new energy law, to be approved by Cabinet by end-June, is still in its initial stage. Amendments are necessary not only because of the memorandum signed with the IMF and the negotiations with the EU, but also due to the quite clumsy and complicated procedures, underlying in the effective legislative act. According to the Minister of Power Engineering Milko Kovachev, the new legislative framework for the sector is being prepared very intensively by a working team, including experts in the branch and lawyers from from the Council of Ministers' legal department. The US Agency for International Development (USAID) is also actively cooperating. One of the drafts projects that the currently effective Energy and Energy Efficiency Act would be divided, with a separate law on energy efficiency. Energy saving is extremely important and is included in our energy strategy. Thus, we'll be able to render our economy competitive, balance the price reform, and reduce the too high consumption of electricity for household purposes, Mr. Kovachev pointed out.

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