EWRC: An urgent decision is needed for financial support from the budget of the water supply and sewerage operators

Attempts to suggest and interfere in the work of the independent regulator are in violation of the law and the basic principles set out in the ZRVKU

Industry / Bulgaria
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An urgent decision is needed for financial support from the budget of the water supply and sewerage operators. This is stated in a statement of the Commission for Energy and Water Regulation (EWRC).

In connection with a statement of the Ministry of Regional Development and Public Works (MRDPW), which states that: "State water companies in the country are threatened with bankruptcy due to high electricity prices and lack of understanding by the Energy and Water Regulatory Commission , which refuses to take action to protect operators, despite the existing legal provisions ", I inform the following:

Since the summer of 2021, there has been an unprecedented increase in electricity prices on free markets in Europe, respectively in Bulgaria. The Council of Ministers took measures to support commercial entities, including water and sewerage operators, by allocating BGN 450 million from the state budget, for support of BGN 110 per megawatt-hour for the months of October and November, said the Energy and Water Regulatory Commission (EWRC).

The water supply and sewerage operators supply the electricity they need on the basis of concluded contracts with suppliers selected under the Public Procurement Act. In a number of cases, as a result of the increased prices in the Day Ahead segment of the Bulgarian Independent Energy Exchange EAD, the concluded contracts are unilaterally terminated by the suppliers and / or the conditions are changed. At the same time, there is no information that the water companies should take appropriate measures to protect their commercial interests in court, the regulator said.

The Commission raised the issue of the need to implement the measures envisaged in the subject of activity of Bulgarian Water and Sewerage Holding EAD, established by Order №1 of 22.01.2020 of the Council of Ministers, for general management of public procurement procedures regarding supply of electricity, insofar as this would provide far better conditions for water companies.

In response, representatives of the holding stated that they are in the process of establishing their own company - electricity trader and indicated that an application for a license is to be submitted to the Commission, and envisage the company to start operations by the end of 2021. However, it has not been of such a nature so far in the EWRC's record keeping system.

In their letter dated September 3, 2021, the Ministry of Regional Development and Public Works stated that "the Ministry of Regional Development and Public Works and Bulgarian Water and Sewerage Holding EAD have taken joint actions to support and strengthen water and sewerage companies." Unfortunately, so far the EWRC has not received more specific information about the planned and / or undertaken actions in this direction.

The Commission has repeatedly informed the Ministry of Regional Development and Public Works and Bulgarian Water and Sewerage Holding EAD about the lack of regulatory opportunity for EWRC to review the current prices of water and sewerage services for 2021, as far as the procedure for applying Art. 19 of the Law on Regulation of Water Supply and Sewerage Services (ZRVKU), which provides for the possibility of reviewing prices in the event of an unforeseen or unavoidable extraordinary event, which significantly changes the revenues and economically justified costs of water operators, requires changes in prices the unforeseen event to be carried out with the decision of the EWRC under Art. 29 of the Ordinance on Regulation of Prices of Water and Sewerage Services (adopted by the Council of Ministers), whereby the Commission amends the officially approved prices in the business plan by adding an inflation index reduced by X at the end of each year before the new price period.

In the current 2021, the water supply and sewerage companies submit to the EWRC business plans and price applications for the new regulatory period 2022-2026, reminded by the EWRC.

The Commission will approve prices of water supply and sewerage services for 2022 as part of the procedure for approving the new business plan, and there are no legal grounds to conduct a procedure for amending approved prices under Art. 29, due to the expiration of the current regulatory period. The Commission conducts working meetings and discussions with all companies, enabling water and sewerage operators to justify and prove the increased costs not only for electricity but also for other materials, external services and remuneration to be reflected in the amended business plans. However, we draw your attention to the fact that the business plans of a number of state water supply and sewerage operators have not been coordinated by the respective Water and Sewerage Associations, and in some cases even the Ministry of Regional Development and Public Works has given negative mandates to regional governors.

It is important to note that the frequent and unforeseen additional increase in the prices of water supply and sewerage services for consumers outside the approved business plans poses significant risks for consumers of water supply and sewerage services. Legislative changes for supporting low-income households to ensure access to water and sewerage services have not yet been made.

A basic principle of the rule of law is that each institution operates within its statutory competencies. Attempts to suggest and interfere in the work of the independent regulator are a violation of the law and the basic principles set out in the ZRVKU, insofar as the accumulated losses by companies as a result of inaction and unfulfilled obligations of the principal will be included in prices and paid by consumers, concluded by the EWRC.

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