Recent electricity exchange prices have been at their lowest levels since the first half of 2021. And everything suggests that this trend will continue - with more and more renewables integrated, the introduction of batteries and low natural gas prices.
However, caretaker energy minister Vladimir Malinov announced that Bulgarian households will probably pay more for electricity from July 1, although he pledged that the increase will not be "dramatic".
The paradox of a cheap energy exchange but expensive regulated prices stems from MPs' decision to postpone the liberalization of the wholesale electricity market by one year. Thus, energy for households will be supplied at tariffs set by the energy regulator, as was the case before, instead of at exchange prices. But the state thermal power plant Maritsa-East 2 will be included in the household energy mix, despite its high production costs. It is the coal quota that will weigh on people's electricity bills.
Electricity will become dearer
For now, the three distribution companies - Electrohold, EVN and Energo-pro - have declined to comment on their price statements, submitted on schedule at the end of April. Later, it became clear that the price increase was "hidden", and their applications contained only quantities of electricity, and the final calculations for the possible increase in prices must be made by the energy regulator. The application of TPP Maritsa-Iztok 2 was made secretly, since in principle it should not participate in the energy mix for households.
At the end of June, the regulator will come out with a special report detailing what increase is ahead, as well as how it will be distributed among the individual market participants. The regulator's final decision is expected to be made on June 30. So far, the hottest topic has been the application of the Kozloduy NPP, where they requested a 30% increase. However, after the minister's conversation with the management, the NPP decided to reconsider their proposal and resubmit it next week.
The regulator also published the new prices requested by the district heating companies. Despite the significantly lower prices of natural gas, they have requested price increases again, with the exception of Sofia's district heating company Toplofikatsia Sofia and the one in Pleven. The reduction claimed by them is about 30% for the former and about 50% for the latter.
However, a price drop on the electricity market is not expected. According to Energy Minister Vladimir Malinov, from July 1, household electricity will become more expensive. He explained that this is on account of the deficit of 450 million levs in the state buffer Security of the Electricity System fund (FSES).
"By the end of June, this deficit will be 550 million levs. If the regulator complies with the regulatory framework, in the next price period this deficit must be compensated, and there is no way that this will not affect the price of household electricity," summarized Malinov.
Not politicians' business
It is not the job of politicians to comment on pricing decisions that are made by ostensibly independent bodies like the regulator. But it is also a fact that some experts believe that a rate hike is inevitable. They say it could be in the region of 3-4% - still above the rate of inflation. For reference - the latest statistics data shows that the annual inflation for April 2024 compared to April 2023 is 2.4%.
According to experts, the money accumulated from the new electricity price will be used to fill in the holes in the FSES. It is widely known that the reason for the missing funds is actually the inaccurate regulator forecast for the expected revenues of the fund. Due to the sharp reduction in the price of exchange electricity prices and carbon price, revenues are greatly reduced. Meanwhile, compensations for heating plants remain super high, despite natural gas having become significantly cheaper. If the regulator had revised the tariffs on January 1 or March 1, the game would be different
Therefore, there are hardly any people surprised by the shortages in the fund. The surprise will be mainly for households, who will ultimately have to pay the price for market fluctuations and inaccurate calculations.
The path to price liberalization
In general, observations that the delayed liberalization of the market actually saves a big price shock for households are not strictly accurate, at least right now. At least because until recently almost every day in a certain time range (most often during lunch hours) Bulgaria was overproducing electricity, which leads to negative exchange prices. Or in other words - electricity producers have to pay to be able to sell their production. In a regulated market, the free electricity cannot reach the people.
In addition, due to the huge production of electricity, the TSO - the Electricity System Operator, regularly issues orders to limit renewable production in order to balance the system. However, politicians can keep residential consumers guessing and make them approve the liberalization deferral despite the apparent lack of competition in supply and the absence of any kind of flexible products.
Postponing wholesale liberalization for a year, or two or three, will not change Bulgaria's mandatory course towards the free electricity market. It will only extend by a year the guaranteed income of TPP Maritsa-Iztok 2 and will put aside the potential coal workers discontent before the vote on June 9.
Recent electricity exchange prices have been at their lowest levels since the first half of 2021. And everything suggests that this trend will continue - with more and more renewables integrated, the introduction of batteries and low natural gas prices.
However, caretaker energy minister Vladimir Malinov announced that Bulgarian households will probably pay more for electricity from July 1, although he pledged that the increase will not be "dramatic".
