Parliament has adopted a decision obliging the Council of Ministers to vote on a mechanism which will set electricity subsidies for businesses. The vote was passed with the support of MPs from all political parties.
The bill did not undergo any changes during the vote in Parliament on Friday. A price cap of 180 levs per MWh was set, above which the state will cover the energy costs of businesses. Until the end of June, a similar subsidy was in effect, but the price cap was set at 200 levs per MWh. Effectively, no help towards electricity bills was available in 2024 because energy exchange prices were low up to June.
Both in Bulgaria and in other countries in the region, however, electricity prices have risen significantly in recent weeks. For July they are 40% above those of June and 75% compared to May. The trend is evident only in Southeastern Europe which means that most of the EU is not experiencing these price spikes.
The adoption of the new decision means that businesses will pay a maximum of 180 levs per MWh, regardless of how much the energy costs on the exchange. Currently, the July mean is 290 levs per mWh.
Such a policy could appease the business sector with elections upcoming, but in the long term it can cause serious problems. For example, businesses get used to help from the state, they do not make investments in energy efficiency and do not hedge the risk with the price of electricity through long-term contracts, etc.
"This decision as of today is a real problem for industrial users who have not hedged the risks of high prices. Just two months ago, long-term products were offered at 50% the price of the stock market at the moment," said Radoslav Rybarski from WCC-DB during the debates.
Even though the party supported the policy, WCC-DB's MPs opposed the motion during the discussion in parliament. Former finance minister Assen Vassilev even stated that "we are dealing with a populist decision that will hinder business".
It is important to note that in previous years when compensatory mechanisms were in place, this stopped investment in green energy, as market uncertainties were dispelled through state involvement.
One of the significant problems cited by Vassilev is that Bulgaria does not have permission from the EC to make market intervention in the energy sector as the previous EC notification expired in June. If a new one is attempted, it will take months, which renders the mechanism meaningless. Energy Minister Vladimir Malinov agreed, but said that "the fact that the regulation has expired does not mean that compensation cannot be attempted. There was such a development in Romania and Greece last week that also intervened in the market".
What business seeks
"Given the extreme energy prices of the last two weeks - prices that we had 'forgotten', we appealed to receive a clear signal that compensations are foreseen to save us from the hike. Prices now are 2-3 times higher than Western and Northern Europe. For us, it is fair to compensate business consumers over 180 levs per mWh," said Vassil Velev from the employer organization AIKB.
Richard Alibegov, representing the restaurant organizations, was particularly vocal, stating that "a decision must be made retroactively from July 1" because otherwise there is a chance of bankruptcies. He says that restaurants have a serious problem because their consumption is mainly in the evening, when prices are at their highest.
At its Wednesday meeting the Council of Ministers already extended the measure by which a part of the income of the electricity producers is taken, so that there are funds for the payment of the compensation in question to businesses.
Parliament has adopted a decision obliging the Council of Ministers to vote on a mechanism which will set electricity subsidies for businesses. The vote was passed with the support of MPs from all political parties.