Банкеръ Weekly

Briefs

EFFORTS TO RAISE THE PRICE OF ELECTRICITY WILL SPOIL THE SUMMER HOLIDAY

By the end of the current year Bulgaria will have ceded its position of a country supplying the cheapest electricity to its population in Europe. To prove this come the new prices charged by the owners of the seven electricity distribution companies in Bulgaria. Austria's EVN which owns Electricity Distribution Company - Stara Zagora and Electricity Distribution Company - Plovdiv, and Germany's E.ON, owner of the electricity companies in Gorna Oryahovitsa and Varna made the step last week. The Austrians asked the State Commission for Energy and Water Regulation (SCEWR) that the current electricity price grow by 8.5% and a fixed fee be charged for reporting and invoicing the energy consumed (the so called electric metre fee). In turn, the Germans insist that the value of electricity offered be raised by 6.5 per cent. Apart from increasing the price, the German owners of the electricity companies in Varna and Gorna Oryahovitsa intend to introduce a fixed electric metre fee, too. It will amount to BGN1.50 a month for household subscribers, BGN20 for companies consuming low-tension electricity, and BGN100 - for those with high-tension electricity consumption.
CEZ which owns the electricity distribution companies in Sofia, Sofia region, and Pleven announced its demands last week, too. The Czechs are planning to introduce a two-component structure of the electricity price that will include a permanent and a variable element. The fixed fee will cover in part the companies' costs for maintaining electricity distribution equipment and will amount to BGN1.80, the owners say. At the same time, they propose that the price for household clients be raised by 6.9 per cent.
If the proposals of the three foreign owners are taken into account, the price of electricity for the entire country will be raised by 7.3% on the average. According to EUROSTAT figures, Bulgaria supplies the cheapest electricity to households in Europe now - about 6.5 eurocents per kilowatthour. It is followed by Greece (6.9 eurocents per kwh), Estonia and Latvia (7 eurocents). The figures shown refer to an average household that consumes up to 3,500 kwh a year. However, the statistics will change considerably if the SCEWR approves the requested increases which will raise the price per kilowatthour above 7 eurocents.
It's true that the amount does not sound so striking but we should add two variables to it. The so called first step, i.e. the cheap 75 kilowatthours which are now charged BGN0.098, or 4.9 eurocents, will be removed from the beginning of October. How much this will burden the consumers' bills is difficult to calculate now, because there are no official figures about the number of households consuming only cheap electricity and the number of electric metres installed in country or summer houses and therefore used very rarely. It can be said for sure, however, that each Bulgarian consumer will notice the cancellation of the 75 cheap kilowatthours in the first bill he receives in October.
The other factor that will swell the prices is the increase of the electricity transmission fee by at least 20-30% required by the National Electricity Company (NEC). The fee amounts to BGN9.31 per megawatthour (VAT not included), but if the SCEWR agrees to change it, that will provoke further price increase requests on the part of the electricity distribution companies which have made their calculations according to the current fee. Then the price may even reach 10 eurocents.
Anyway, the regulator will have fewer reasons to refuse further increase of the price in the future. Even last year CEZ, E.ON and EVN insisted on increasing the value of electricity, but were rejected with the motive that they had not made sufficient investments in the network. However, the real reason was merely political - the price leap was first impeded because of the coming elections and then because of the promises of the ruling parties that energy carriers would not grow more expensive.
Now the situation is slightly different. The proposals of the three companies relate directly to the investments aimed at gradual meeting of the European standards for the quality of supplies and mostly at reducing the technological losses along the network. Should they be realized indeed, that will reduce the pressure on electricity prices in the long run. More than BGN328MN will be needed for modernization of the three companies owned by CEZ alone in the period 2005-2007, the company plans indicate.
The other important expenses that CEZ, E.ON and EVN will make by year-end relate to the replacement of the electric metres. The law requires that they be renovated and brought out at the border of the subscribers' property. In 2005, the three companies owned by CEZ alone invested BGN65MN in this operation. Whether these figures will convince the regulating commission of the fact that electricity price needs to grow will become known within a month.

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