6 June 2023
“I firmly object to the planned increase in the prices of heat energy for household customers for the period from 1 July 2023 till 30 June 2024. The increase in the price of central heating and hot water is unacceptable to the citizens given the current volatile economic situation in the country and the possibilities the statutory framework allows to the EWRC to balance the interests of consumers and companies.” The position of Ombudsman Diana Kovacheva was presented today during the public discussion at the Energy and Water Regulatory Commission (EWRC) by an expert from the institution.
The draft decision of the Commission envisages an increase in the regulated prices of heat energy for end customers of central heating companies using natural gas as their main fuel in the range of 0.05% - 0.48%. According to Prof. Kovacheva, this is inadmissible, especially in the context of a substantial and lasting decrease in the main pricing factor – the prices of natural gas which, according to the EWRC forecast, will drop by an average of 23.82% for the next regulatory period.
The Ombudsman reasons that, in view of the decrease in the price of the main fuel, it is justified and logical to discuss a decrease in the prices of the heat energy generated from the natural gas for hot water and heating for end customers and not another increase.
The Public Advocate notes that, in practice, the minimum increase in the prices of heat energy proposed by the EWRC will turn into a substantial increase in heat energy for all customers of hot water and central heating – by more than 11% as of 1 July 2023 due to the increase in the VAT rate from 9% to 20%. Thus, the customers will finds themselves in the absurd situation in which there is a significant decrease in the prices of natural gas but they will pay higher prices for heat energy, such that were not in place even during the unprecedented energy crisis in 2022.
In her opinion, the Ombudsman suggests that all possibilities should be explored and used to compensate the overall revenues of approximately BGN 276 million still not collected by central heating companies using natural gas as their main fuel while using other sources rather than increase the end prices of heat energy.
“I believe that it is right for the goal for the new regulatory period to be a reduction in the prices of hot water and central heating in order to compensate the increase in the VAT rate from 9% to 20%,” Prof. Diana Kovacheva.
She insists on a comprehensive analysis of the balance of the money in the Electricity Security System Fund in a comparable period until 30 June 2023 in order to consider the possibilities for the burden of the revenues not collected by the central heating companies for the regulatory period 1 July 2022 – 30 June 2023 to be taken on by the Fund.
She emphasises that it is necessary to analyse carefully once again the possibility for deferred compensation for the differences between the forecast and the actual costs of the natural gas companies – for several following periods to ensure a more equal allocation in time of the financial burden for end customers when paying the uncollected revenues of the central heating companies.
As regards household electricity, in her opinion the Ombudsman calls for a review of the EWRC draft decision on the prices of electricity given the decrease in the price of electricity on the energy exchange in the past few months and the payment of compensation by the State to the electricity distribution companies and the Electricity System Operator for the electricity for technological costs.
According to publicly available information, BGN 497 million was paid to compensate for the technological losses of the electricity transmission and distribution network for the period from 1 January 2022 until 31 March 2023.
“I insist that the EWRC provide detailed and clear information how these funds are reflected in the prices of network services for household consumers. Otherwise, doubts are cast as to the manner of using these funds provided freely by the State,” the Ombudsman states.
Prof. Kovacheva is of the opinion that, given the continuing grave economic situation in the country, the process of determining the prices of electricity should, more than ever, observe strictly the principle of ensuring a balance between the interests of the energy enterprises and the customers.
According to the EWRC draft decision, the prices of electricity will increase in comparison to the current ones as follows: for Electrohold Sales EAD by 3.44%, for EVN Bulgaria Elektrosnabdiavane EAD – 3.41%, and for Energo-Pro Sales AD – 4.24% for the period from 1 July 2023 to 30 June 2024.
The Ombudsman asks what grounds justify the increase in the prices of night-time energy, respectively, by 120.92% for Electrohold Sales, 151.44% for EVN Bulgaria and 154.69% for Energo-Pro, as well as of day-time energy – respectively by between 30.85% and и 32.09%, given that the price based on which NEC will sell electricity to end suppliers is increased by 38.67 % (from BGN 81.90/MWh to BGN 113.54/MWh).
Prof. Kovacheva also asks why the component for the activity “supply with electricity by an end supplier” is set at the maximum amount - 7%.
She notes that the amount for the average annual technological loss (loss along the network) is set at 7.5% for each of the three electricity distribution companies.