Банкеръ Weekly



There is something wrong in the price regulation of the Bulgarian energy market. In all normal market economies the price policy is based on the principle the more you consume, the less you pay. And the tariffs for the big clients, which consume much more electricity than households and small family firms, are several times lower. Such a type of price formation is not only in line with the simplest economic rule lower prices for bigger turnovers, but with sound reasoning as well - to encourage those who produce goods and create working positions, that is new solvent buyers of the respective commodity (electricity in this case). Such a scheme is to the advantage of everybody. Paradoxically, as it might seem, taxpayers benefit, too, because the higher output and sales increase the gross domestic product as well, and the social energy subsidies become a far lesser burden to the budget. Everything is topsy-turvy with energy prices in Bulgaria and the effect of the increased tariffs for industrial consumers will be extremely negative for everyone. Some of the small and medium-sized companies will reduce their electricity consumption accordingly, cutting down their output or the offered services. Others will simply close doors, contributing to the increase of unemployment. Of course, the Exchequer will not gain anything from that either, because instead of collecting taxes, excise duties, etc., it will be spending money for the jobless. The surviving small and medium-sized enterprises will be forced to hike prices (the branch chambers of the food and drinks industry and of services have already warned that the electricity price hike will result in at least a 30% leap of retail prices). This, in turn, will lead to a shrinkage in consumption and tax receipts will go down still further. Energy companies (which are among the biggest taxpayers in the country) will also make a hole in the state budget as they will report a weaker financial performance due to the shrank production. Moreover, the money which they will invest in the most urgent repairs will lead to a much steeper increase of energy prices next year. And this vicious circle will spin still faster.

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