EWRC: District Heating Sofia wants to continue cross-subsidization in electricity production. The company denies it
The debate will be decided after public consultation, and the regulator has the final say on prices
The published proposal of "District Heating Sofia" for requested prices for the next regulatory period is contrary to the legal provisions. The proposal means the continuation of cross-subsidization and the production of expensive electricity to keep the cost of heat cheap. This became clear today from an announcement by the Commission for Energy and Water Regulation. "District Heating Sofia" announced a one-component price of thermal energy of BGN 97.78 per megawatt hour, excluding VAT, which reflects the excess revenue of the company in the amount of BGN 195.932 million. This includes the lower prices of natural gas and quotas carbon emissions for the previous regulatory period. According to the regulator, this means the continuation of cross-subsidization between the heat and electricity produced, i.e. reduction of the price of thermal energy at the expense of a very high price of electrical energy. "Such an approach ensures a lower price of thermal energy for the consumers of "District Heating Sofia" EAD, at the expense of a higher price of electric energy paid by all consumers in the country and is in violation of Article 31, item 6 of The Energy Law", the regulator states.
However, "District Heating Sofia" points out that the price proposal clearly states that the proposed price of BGN 97.78 per megawatt hour includes a correction of excess revenue under Art. 8, para. 10 of the Ordinance on regulation of thermal energy prices, as a result of the lower prices of natural gas and carbon emissions quotas during the expiring regulatory period. "We consider this approach to be fair and open to consumers of heat energy in view of the fact that it reflects expectations for price levels in the next regulatory period, given the dynamics of the markets," the heating company wrote.
The Metropolitan Heating express their disagreement with the position of EWRC, that this approach leads to the continuation of cross-subsidization between the produced heat and electricity, because in the price application, the company has set a correction of excess revenue equally with the price of electricity.
"District Heating Sofia" has never in any way initiated the application of cross-subsidization, but only follows the model imposed by the regulator in recent years", the company points out. From there, they emphasize that it is within the powers of EWRC as a regulator to confirm or change the pricing proposal, as well as the distribution of the excess revenue with a view to maintaining a balance between the interests of all parties in our energy system, including those of consumers.
The debate between EWRC and District Heating Sofia will be resolved after the public discussion, which will take place next month. And the regulator has the final say in setting prices.