Stanislav Todorov: The average increase in the price of heat from July 1 will be 39.26%

The average increase in the price of heat from July 1 will be 39.26 percent. This was said after the end of the open meeting by the Chairman of the Energy and Water Regulatory Commission Stanislav Todorov. He told reporters that this was according to previously published reports.

As it became clear earlier in May, all district heating companies have applications for price increases between 150 and 300 percent.

"EWRC has considered and justified an increase of between 100 and 120 percent due to the fourfold increase in the price of natural gas," he said, adding that in order to avoid shock, it was decided to seek compensation through the Electricity System Security Fund. This led to the vision of rising to 39 percent.

"In order to avoid such a" shock "of prices for household consumers, the EWRC has found reserves in the system and rather through the Energy Security Fund to compensate for this increase and reduce it to 39 percent," said Todorov. According to him, the managers of the district heating companies have expressed concern, but at the same time have accepted the estimates made by the EWRC.

Stanislav Todorov also pointed out that each district heating company can introduce lower prices than those set by the regulator. He reminded that the EWRC sets maximum prices, but it is the right of every district heating company to implement such a trade policy that is in line with its interests and the social tolerance of its consumers.

EWRC will take into account all the proposals of the district heating companies, he said, adding that so far he has not heard a better method of pricing.

After the regulatory review and application of the pricing model for each of the companies, the EWRC working group calculated an annual individual estimated price of heat for the regulatory period from July 1, 2022 - June 30, 2023.

As previously announced at this stage, it is estimated that for household consumers of Sofia District Heating EAD the price will be BGN 136.82 per MWh at the current price of BGN 98.48 per MWh, which is an increase of 38.93%.

The consumers of EVN Bulgaria District Heating EAD will pay a price of BGN 122.80 per MWh, at the current price of BGN 99.55 per MWh - an increase of 23.26 percent. The price of Veolia Energy Varna EAD is planned to increase by 30.66% to BGN 128.43 per MWh. The current price is BGN 98.29 per MWh.

In its reasoning, the working group that prepared the main reports points out that these higher prices are the result of a fourfold increase in natural gas prices and a twofold increase in the value of carbon emissions. They also have the largest share as an impact on final prices. For companies across the country, these two components represent an average of 80 percent of their heat production costs. For example, for Sofia District Heating natural gas and emissions form 87.61 percent of the price of the district heating service, for Pleven District Heating this share is 85.52 percent, for Vratsa District Heating - 83.08 percent, for Vratsa District Heating - 83.08 percent. Pernik "- 81.68 percent. The situation is similar with other companies, where natural gas and carbon emissions are also determining factors for the formation of the final price - from 64.36 percent to 79.34 percent.

In the report, as a result of the sharp increase in global gas demand and in recent months due to the military conflict in Ukraine, natural gas prices for district heating have increased almost fourfold - from BGN 45 per megawatt hour to over BGN 160 per megawatt hour. During this period, heat prices for consumers remained unchanged, which led to increased costs for companies and the accumulation of deficits. In the new period, this deficit will be compensated, as otherwise the companies may go bankrupt, added the EWRC.

Carbon prices over the past one year period from July 1, 2021 also increased by 79.02 percent - from 51 euros / tonne on July 1, 2021 to 91.30 euros / tonne as of July 1, 2022. This further increases costs of companies, which should be taken into account in heat prices, added by the regulator.

Despite the compensation provided by the government for natural gas in the total amount of over BGN 220 million for the period December 2021-April 2022, the district heating company has accumulated an additional deficit of gas costs over BGN 500 million in the past period it amounts to about BGN 350 million, the EWRC said.

Despite these objective factors, which justify the requests of energy companies to increase by an average of 123.58 percent, EWRC has found regulatory mechanisms to cover part of the cost of district heating through the Energy System Security Fund, which has so far served to compensate producers of green energy - from wind, water and sun. Additionally, after performed analyzes, the regulator adjusts a number of pricing elements of the companies, which can be directly influenced - costs for depreciation, repairs, remuneration, etc. In this way, the EWRC minimized the increase in heat prices.

With regard to Toplofikacia Sofia, the Commission halved the technological costs of heat for transmission - from 947,963 megawatt hours to 457,963 megawatt hours, or 490,000 megawatt hours. With this adjustment the price for heat consumers is actually reduced from BGN 155.02 per megawatt-hour to 136.82. As a result, instead of being increased by 57.41 percent, the price for Sofia subscribers is expected to increase by 38.93 percent.

During today's meeting, various views were shared by companies in the sector.

The public discussion will be on June 7. After the submission of the opinions by the companies today and after the public discussion, the regulator has the right to comply with possible motives on the part of the companies.

The regulator will issue a final decision after a closed meeting on July 1.