"Bulgargaz" will ask for a higher gas price from September, compared to the current application for BGN 315.16 per MWh

Energy / Bulgaria
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In the updated application that "Bulgargaz" will submit to EWRC for determining the price of gas from September 1, a larger increase will be requested. The reason is that the stock market index has increased by 17% from the date of submission of the application on August 11 to today. Thus, the estimated price of gas for the upcoming September becomes BGN 350. This became clear from the statement of the executive director of the gas company, Denitsa Zlateva, during the open meeting at the EWRC, where the report of the working group on the approval of the gas price for September was discussed, according to which the public supplier sells natural gas to end suppliers and to persons with an issued license for the production and transmission of thermal energy.

In the gas company's application, submitted on August 11, it is proposed to approve the gas price for the month of September 2022 in the amount of BGN 315.16 per MWh (without access, transmission, excise and VAT prices), including the activity component public supply in the amount of BGN 2.24 per MWh and the "obligations to society" component of BGN 0.35 per MWh. The requested price is 5.8 percent higher than the one approved for August - BGN 297.89 per MWh.

As Zlateva specified during the EWRC meeting, the expectation is that the final increase for September will be higher than the proposed increase of 5.8% compared to August, but lower than the stock market index of 17%, which is due to the prices achieved as a result at the "Gas Hub Balkan" auction.

In response to a question from the chairman of EWRC, Zlateva stated that, on average, as of August 28, it is an indicative price of 270-275 euros per MWh. Later, in front of journalists, the executive director of "Bulgargaz" specified that, as of today, the estimated price of the blue fuel for September is about BGN 350.

Denitsa Zlateva also clarified that the necessary quantities of gas for September have been secured.

What users need to understand is that if the TTF index had kept its value as at the beginning of August, the calculations indicated that we could reduce the price as a result of the Azeri gas and the Gas Hub Balkan auctions, noted for its part the chairman of EWRC Ivan Ivanov.

As for the mix, Denitsa Zlateva clarified that it includes the agreed quantities of Azeri gas, two partial cargoes of liquefied natural gas, as well as the quantity from the "Gas Hub Balkan" auction at an "extremely competitive price" from the supplier who won this auction.

Denitsa Zlateva drew attention to the importance of the gas connection with Greece on the one hand to ensure the necessary supplies and on the other hand to achieve lower prices for blue fuel. "It is very important that this connection works from October 1 to enter the price mix and it will have a direct impact on contract prices," she noted, and expressed an expectation that by September 10 the company will have confidence that deliveries will indeed start on October 1.

The Chairman of the EWRC, for his part, expressed hope that this would happen so that prices could begin to decrease. He agreed with the good result reported by Zlateva from the "Gas Hub Balkan" auctions, which are also important for the lower price levels. Requests to participate in Revitusa's liquefied natural gas slot auctions also offer hope for lower prices. EWRC Commissioner Alexander Yordanov, for his part, specified that the Bulgarian and Greek regulators have several more procedures ahead of them regarding the gas connection with Greece and requested support.

In October, the total monthly quantities under the contract with the Azeri supplier were included, an entire tanker with liquefied gas was secured, and additionally an auction was launched for the remaining quantities of "Gas Hub Balkan", which is about to take place. "We expect a really competitive price there, because the last two tenders have shown that the price offers we receive during open procedures of "Gas Hub Balkan" are many times better than previously concluded contracts for other alternative suppliers", Zlateva also stated.

For November deliveries, Bulgargaz is discussing how to structure the auctions - whether they should be monthly or for a longer period. "Our main goal is to ensure the heating season, which means supplies until the end of April. At the beginning of October, we will be ready and launch the relevant procedures," emphasized Zlateva. She assured that "Bulgargaz" will provide the necessary supplies.

In response to a question about how far the talks with Gazprom have come, Zlateva stated that Bulgargaz, as a party to the contract, fulfills it by sending requests for supplies every day, but receives confirmation of zero quantities for the next day. She also clarified that the talks that are being held at the moment are at a political level and the public provider at this stage is only fulfilling the existing contract by sending requests.

The executive director of "Bulgargaz" also drew attention to the efforts made by the company to inject the necessary amounts of blue fuel into the underground gas storage facility in Chiren (PGH Chiren). In response to a question from the chairman of EWRC, whether the goal of filling the gas storage up to 80% will be achieved, the company expressed confidence that this will happen. One reason is that September is a month with lower consumption. In addition, "Bulgargaz" has taken the approach of not applying the take or pay clause to customers who do not withdraw requested quantities, leaving the undrawn fuel for storage. The approach was assessed by the chairman of EWRC as correct.

Heating systems

The Chairman of EWRC commented after the open meeting in front of journalists and the prices of thermal energy.

The decision on heat energy prices will be valid until January 1, 2023, he said.

According to Ivan Ivanov, no one can give a guarantee that the prices of heating and hot water will not increase after January 1, 2023. He noted that the current increase in prices for heat energy, in particular for Sofia consumers, is largely also due to the "extremely incorrect suspension of market mechanisms with the introduced moratorium", which after 6 months of "freezing prices", inevitably led to a 39 percent increase in the price of thermal energy for Sofia.

At the moment, the heating companies are being checked for the way in which they formed the reduced VAT, added Ivanov, clarifying that it is not carried out by EWRC. However, if it does not give the desired result, the regulator will intervene. At the same time, Ivanov said that there is already a clear request that probably the accounts of the users will be corrected.

In response to a question about whether negotiations with Gazprom could be a useful move, Ivan Ivanov expressed skepticism.

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