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Mobsters in Energy or just Energy Market Problems?


The last few days of  the energy sector passed in frenzy. The big business - represented by the Association of Employers' Organizations in Bulgaria rotating chairman Kiril Domuschiev accused almost everybody of mafia activity in a statement, broadcast by his own TV. He blamed all -  from the electricity dealers, through the BEH management and structures, all the way to the Energy Minister and ...


"There is an energy mafia in Bulgaria. I hope that one day the prosecution will find time to get into the energy sector and dig up a little bit, "Domuschiev told Nova TV.

Talking about the energy mafia is not news because it's been going on and on for 30 years. The surprising thing in this case is that for the first time the energy Minister Petkova struck back  and a little later Hristo Kovachki  gave an interview.

Domuschiev's statement was made after electricity prices in Germany reached EUR 1 / MWh over the weekend (9 February) and remained at EUR 65 / MWh in Bulgaria. "Businesses want security and predictability for the price of electricity. This is a trend that remains steady, influences the population and, ultimately, consumption. Our price is 25-30% higher than prices in countries with developed economy ", said Dommuschiev.

CEIB's president was adamant that all this was being done deliberately, but there was also an element of unprofessionalism. Therefore, the business representatives wanted the resignation of BEH management and the executive director of the Bulgarian Energy Exchange.

Shortly afterwards, Energy Minister Temenuzhka Petkova explained that "the rise in electricity prices is due to the increased demand from Romanian and Hungarian electricity traders on the Bulgarian Stock Exchange." She added her agency had asked the stock market to provide analyses of the situation.

Another reason for the high prices is that on February 9th the production of electricity from renewable energy sources in Bulgaria marked a serious decrease.

One of the largest traders in the energy branch also involved in the brewing conflict.

“The energy for BG industry is the cheapest for the region of South-Eastern Europe," Hristo Kovachki  expressed his position to BTV. "I think it is not up to the business to interfere with the energy industry," he added.

  In connection with employers' accusations that Kovachki's companies buy

electricity and then resell it at speculatively high stock prices the businessman replied that these reproaches were "incorrect", because employers had no restrictions while competing in purchase of electricity and some of them were and still are owners of cogeneration plants, hydropower plants, renewable energy sources and other energy facilities.

The businessman explained the high prices on February 9 as follows: “The reason is simple, the winter is warm at the moment - the warmer the winter and the stronger the winds (and in Germany there were very strong winds and a lot of sun), the lower the cost of electricity, that’s why it was about 1 euro on Sunday. There was no wind in Bulgaria, no sun.” In his opinion no conclusions should be drawn about the electricity market on a day-by-day basis.

Kovachki also showed Eurostat's charts of electricity prices on EU energy exchanges in 2019, where it can be seen that the electricity average price  on the stock exchange in Bulgaria, at which industrial consumers buy, is the lowest in the region - 47.46 EUR per megawatt hour. He also added Eurostat data of the daily cost of electricity for household use - almost the same in the EU on a producer-price basis, only the fees make the difference, and they are low here, in BG.

For the import of waste from Italy for combustion in Bulgarian TPP Kovachki said, that he was not involved in such activities, but he knew people in this business. He described the allegations that much money was made out of it as "legends" and said he supported the government's efforts to restore order in this area.

For the "Banker " electricity dealers explained that the BG big business is accustomed to buying electricity on the energy exchange by the market segment "Day Ahead". The idea of this market is to get additional amounts of energy to the long-term contracts one has already signed. This market should not be fundamental to commerce, but supportive, while in Bulgaria the opposite is valid and few large industrial customers have purchased electricity under long-term contracts.

After all, it is a fact that a storm through Western Europe has led to the overproduction of electricity in some power plants there, which resulted in a price fall. The technical problems in Hungary and Romania, on the other hand, have pushed traders to our market - we all want a single market in the EU, don’t we? As for the business in our country, it has obviously not yet fully  understood that the stock game is not easy and is similar to that of the stock market. Let's hope that, at least on February 9th, some thought of "risk hedging" and analyzed why they were not well prepared for the then high prices.

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