WHAT SHOULD BE DONE WITH SOFIA CENTRAL HEATING UTILITY?
Noisy scandals about the Sofia Central Heating Utility have quickly become yellow reading of criminal nature. They also have spread over all layers of the Bulgarian society. The first to step on the heating arena were Sofia Mayor Boyko Borissov and the Minister of Economy and Energy Roumen Ovcharov. The head of the National Investigation Service Angel Alexandrov and the Deputy Minister of Justice Dimitar Bongalov followed them. Even the country's Chief Prosecutor Boris Velchev interfered and quickly replaced the prosecutors who observed the utility's draining case. The missing millions provoked a conflict between the State Financial Inspection Agency and the State Energy and Water Regulation Commission. The regulating head Konstantin Shoushoulov's ridiculous explanations about the heating prices in turn resulted in intervention by union leaders and the Consumer Protection Federation. The only one to stay aside of the conflicts for the present is the Holy Synod, but it too may soon get involved in order to defend its flock. Because it is an injured consumer of heat power, too.
In fact, it's all 300,000 customers of the Sofia Heating Utility who are injured. Some of them are already calculating how to get back the amount of the bills paid that has gone for the luxurious acquisitions and the fat accounts of the utility's former director.
When scandals grew to a new height in the end of last week, Minister Ovcharov threatened to declare the Sofia Heating Utility bankrupt. He justified himself by the company's accumulated debts to Bulgargas rather than its draining. On August 14, the new prosecutor on the case against Valentin Dimitrov - Bozhidar Dzhambazov, and his colleague Mariana Stankova began to interrogate officers of the heating utility as well as external individuals linked to the drawing, receiving and transferring of money from and to the company. I don't think one person is able to do all the things Dimitrov is said to have done, prosecutor Dzhambazov said adding that there had been supporting and potential cooperation schemes in the company. According to him, it should be found out who has supported Valentin Dimitrov. If their actions are criminal, accusations will be brought against them, the prosecutor threatened. He explained that on the basis of the company's auditing report announced by the State Financial Inspection Agency new accusations might be brought - for official misappropriation and business crimes.
On Tuesday, his opinion was also shared by Nikolay Ivanov, former head of the financial investigation service. Valentin Dimitrov has not participated in the draining scheme alone, Ivanov said. He then added that a chance had been missed for creation of a group between the Ministry of Interior and the financial investigation that would identify which companies remitted money from Bulgaria to offshore firms abroad and would thus disclose the political umbrella. The former financial investigator also requested that Interior Minister Roumen Petkov disclose the personal file of Valentin Dimitrov who might have taken part in circles of companies which cover significant economic interests.
The Sofia heating utility privatisation is a political struggle between different institutions that want to exercise control. This is what Lachezar Bogdanov, an Industry Watch economist, said in front of the Bulgarian National Radio. He said it wasn't of great importance who exactly would privatize the company - the important thing was to provide control in order to prevent corruption. However, the economist claimed that a company that was practically insolvent could not be sold. The company should first pass a liquidation procedure because its debts were significant, Bogdanov added. Alternative heat sources will force the central utility stick to competitive prices and provide a service of high quality which would be in favour of the consumers.
This practically put the start of the most important debate: What should be made with the Sofia Central Heating Utility? According to the Minister of Economy and Energy, it was high time the company was restructured and financially recovered. The state cannot just watch the Metropolitan Municipality failing to take measures to improve the situation. The municipality has proved for 14 years that it was inefficient owner and the inspections made now and the following results are caused by this inefficient management, Minister Ovcharov claimed. He said that with a BGN107MN total capital now the utility has debts amounting to BGN160MN, of which BGN114MN to the state-owned Bulgargas. It means that the company may be declared insolvent and that its recovery can begin, Ovcharov added. In turn, legal experts from his department explained that in case this kind of procedure is fulfilled the state is to become the utility's major owner and the municipality will remain with no voting rights on its future.
The mayor of Sofia did not comment on the threat, but in turn proposed that the state demand back the money ripped off by the utility. I think that all the money spent on tangible assets or found on accounts must go back to the company. Thus its debts will be reduced and if the charge is needed to be raised by one lev, then it must be raised by BGN0.95 or BGN0.90. It means that the money stolen or lost must be found and returned to the company. This can be achieved in practice, the mayor said.
Metropolitan Municipality officials refused to comment on his new proposal. Neither did they explain how exactly people living in Sofia could be compensated for the overcharged heat bills. However, they insisted again that the only panacea for the utility was its privatisation. Indeed, two months ago the Ministry of Economy and Energy and the Metroplitan Municipal Council reached a principle agreement that an interdepartmental committee is established to coordinate the sale of the company shares. The two owners agreed that each of them would sell his stake by himself: the state - 42% of the shares through the Privatisation Agency and the municipality - 58% through the Metropolitan Municipal Privatisation Agency.
According to art. 3 and 4 of the Privatisation and Post Privatisation Control Act, a procedure of the kind is possible. The problem is, however, whether or not it is expedient. And whether it may be anticipated by the insolvency request which Minister Ovcharov threatened to make. In fact, the biggest debts of the heating utility are not to the state-owned Bulgargas but to its foreign creditors - the World Bank and the European Bank for Reconstruction and Development. The company owes them a total amount of EUR140MN and the financial agreement with the two institutions reads that their consent is needed in order for the restructuring and privatisation process, including liquidation, to begin.
But if in their already personal battle for the Sofia utility either the minister or the mayor undertake actions that are not coordinated and approved in written by the two institutions, those EUR140MN will become subject to immediate execution. They will be paid off from the state treasury, because both loans have been guaranteed by the state. Again, it means that in case of a failure it is the taxpayer who will be charged even higher.
Podkrepa Labour Confederation requires immediate legal restructuring of the State Energy and Water Regulation Commission and establishment of a public council as an element of the commission structure with a right to veto on its decisions. The public council will have to include representatives of businesses, labour force and consumers. This is said in a declaration by the union presented by the Confederation Vice President Dimitar Manolov. According to union representatives, this is going to solve the problems provoked by abuses in the company and unreasonably high prices.
In turn, the State Energy and Water Regulation Commission is given statute of an institution above which there is only God. Podkrepa confederation proposed that the commission become a totally open body with strong public control, because it is now doing whatever it wants and its operations are not transparent. The council of employers, consumer organisations and unions proposed by Podkrepa will judge whether or not the commission is doing its job from a social point of view. Besides, interests in such a council would be rather different to let it unite with the commission.
According to Manolov, the crimes committed in the Sofia Central Heating Utility remained unpunished because of deliberate mechanisms of the rulers. The energy, water supply and sewerage are the only expense covering systems in Bulgaria. They are natural monopolies where creating competition is not possible. These natural monopolies are overgrown companies and are able to do whatever they want to and deviate whatever amounts they want, since people are always forced to pay without a murmur in the end, the vice president of the union organisation stressed.