KEVR – Guilty on duty

Comment by Kaloyan Staikov of the Institute for Market Economics

Whatever happens in the Bulgarian energy industry, everyone accuses the regulator, as if he was omniscient and omnipotent. Prices are rising – the regulator is guilty, an unfair contract for Russia's gas supply – the regulator is guilty, a private company looking for a buyer of his business – the regulatory body is guilty. When such accusations come from the average Bulgarian, who may not be familiar with the separation of powers and the functions of independent regulators, it is not so dangerous. However, when they come from MPs and ombudsmen who are very knowledgeable about the powers of the Energy and Water Regulatory Commission (KEVR), they are neither accidental nor accidental. harmless

Traditionally, from the beginning of July, the new regulated tariffs for the next 12 months and it is not surprising that they increase, at least because the activity of the regulated market continues to be subsidized by the free electricity market. With them, however, a number of other changes, which are not trivial:

– the new regulatory period for the regulation of electricity distribution companies, which lasts three years,

– starts at the beginning of the year. at least 4 MW, with the exception of those with preferential prices, are obliged to sell their electricity to the Bulgarian Independent Energy Exchange (BENB)

– producers at preferential prices and a power of d & # 39; 39; at least 4 MW, whose production has been made up to now The electricity purchased from NEK will already be traded on BENE

– the supply of electricity for technological costs to the Network operator and the three electricity distribution companies, until then carried out by NEK at regulated prices, will already be carried out by BENB at market prices.

All of this makes comparisons with the past price period, as well as the predictions for the development of the regulated and free market over the next 12 months virtually impossible One thing is certain, however, that Regulated prices must increase for at least three other reasons, except for the termination of cross-subsidization between a free market and a regulated market. The first is that during the last two price periods, the KEVR has stubbornly set its expectations for an electricity market price at BGN 70 / MWh, while between July 2016 and June 2017, it is BGN 71.88 / MWh (2.7% higher), and in July 2017 – June 2018, it was 72.38 (up 3.4%). The second reason is that in the next 12 months is almost impossible to predict the evolution of market prices, but the regulator still expects the average price

at 70 BGN / MWh In the past two years, market prices of electricity on the stock market have increased and it is normal for regulated prices to follow the same trend. The third reason is trivial – the National Electricity Company has accumulated losses of about 1.5 billion levs on estimates in June 2014, the compensation of which has never found a place in price decisions up to Now and should sooner or later be included in the regulation. With respect to regulated gas prices, the situation is much clearer – oil prices rise, which inevitably leads to higher prices and natural gas and all other regulated prices in the United States. sector as we have written. The reason for the growth of the price of natural gas is "the terms of the contract № 02-12-13 of November 15, 2012 for the supply of natural gas between OAO Gazprom Export and Bulgargas EAD, alternative fuels for the last nine months before pricing, "says the regulator each quarter [1] .In other words, the price of natural gas in the third quarter of 2018 depends on the price of alternative fuels (petroleum distillates) to During the previous nine months

As oil prices rise as of January 20, 2016, it is normal also occurs with natural gas prices in Bulgaria.This is very easy to see on the following chart, which clearly shows that natural gas prices are falling in Bulgaria and that nine months after the onset of the upward trend in oil markets, the same is true for gas prices.In addition, in its decision on prices, the regulator was draws attention to the fact that alternative fuel prices have risen by 11.5%, to which is added the appreciation of the US dollar compared to the BGN of 3.3%. which makes a total increase of about 15%. However, the increase in the regulated price is less than 11% and the difference is to the detriment of "overpayments" of previous periods or losses accumulated in subsequent periods. In both cases, it can hardly be said that the regulator does not protect the interests of consumers.

In the same sense, the Ombudsman accuses the fact that when the price of gas decreases, it does not affect the regulated price of electricity, i. the regulator does not protect the users. The reason is that the burden of producing electricity from natural gas in the total output is about 5%. The price of natural gas in 2015 is 18% lower than in 2014, which at 5% of electricity production from natural gas, has an impact of less than 1% on the production of natural gas. ;electricity. Considering that the cost of fuel – natural gas – the final price of electricity is far from 60%, the final impact on consumer prices would be negligible. A number of other factors, such as supply and demand in the country and region, metrological conditions, the old accumulated losses, and so on.

Critics of regulatory decisions not only do not solve objective problems. The regulator's work lacks sufficient expertise to meet growing obligations, but also undermines its authority as an expert body. Every "benevolent" second constantly imposes functions such as renegotiating the Sofiyska Voda concession agreement, the electricity purchase agreements between Maritsa East 1 and 3 TPP and NEK or the long-term contract between Gazprom Export and Bulgargaz. This can not be done because the regulator is not a party to these contracts, but only reflects their conditions in its pricing decisions, as provided for by the Energy Act

. Energy and Water Regulatory Commission is far from an ideal independent regulatory body, but, for several years, its work and the quality of regulatory decisions have been significantly improved Political Assaults permanent and political pressures (such as last year's election or the CEZ agreement) only impede its ability to strike a balance between the interests of the sector companies and those of consumers. Because when such a balance is missing, consumers suffer – either because of too high prices or because of too low prices, which lead to an arbitration procedure against the state, and the price is always paid by the consumers

Denitsa Raikova

Expert.bg