Over the past 25 years of transition the Bulgarian energy sector has lacked in basic transparency. This is also valid of the National Electric Company (NEC). With the inevitable liberalization of electricity supply however, the public will now have access to a few secrets scrupulously kept in the dark.

In a statement last week the Chairman of the Energy and Water Regulatory Commission (EWRC) Ivan Ivanov made clear that NEC was buying energy at a gross rate of 160 leva (80 euro) per MWh and was selling it as a public supplier at a regulated rate of 125 leva. This has logically generated a deficit, however in only part of NEC operations, i.e. on the regulated market. Economist Kaloyan Staykov from the Institute for Market Economics (IME) comments:

“When discussing the deficit at NEC we have to name the operations where it is generated. Is deficit generated in free market trade, on the regulated market, in investment programs, in power generation or in energy exports? The problem's location has to be identified so as to come up with solutions. It is now difficult to identify any NEC operation that generates profit. It is also impossible to formulate a clear solution because we are not aware of the source of the problem. In the context of a liberalized market NEC is a redundant structure.”

There are claims that businesses pay higher energy rates so as to provide for subsidized rates paid by households. This however is disputable because some companies buy electricity at regulated rates and other - at liberalized rates. Kaloyan Staykov contends that for the time being, the green energy surcharge on the regulated market ranges from 45 to 50 leva per MWh, and on the free market it is to the tune of roughly 15 leva. This way consumers of regulated electricity pay for the costly production of green energy facilities. On the free market though trade is underway with cheap electricity.

Some analysts have tried to suggest that liberalization might result in higher power rates. Experience however, suggests the opposite.

A week ago in Oslo, an agreement was signed by the Bulgarian Independent Energy Market and the Norwegian Nord Pool Spot, the platform of the long-expected liberalization of the electricity supply market in Bulgaria planned to start at the beginning of next year. However, the Norwegian side has not delivered scenarios of how exactly this is going to happen, the EWRC chairman said.

Once the market becomes operational there will no longer be expensive energy sold to customers on the regulated market and cheap one sold on the free one.  There will be energy available at a market price. The surcharge for green energy will be added to this price regardless of whether buyers are households or industrial consumers.

By mid-2015 further amendments to the Energy Act will be submitted to parliament meant to end the current model in the sector. Under this model NEC buys energy at different prices from producers and forms an energy mix. NEC itself should undergo a transformation as well after for a quarter of a century it has been the stronghold of state monopoly in the sector. So far the company has been acting as a producer, dealer, distributor and above all as a black hole in energy constantly generating deficits. There are hopes that the creation of an energy market will render futile at least two of NEC operations: sale at regulated prices and sale at free ones. In this way the role of NEC will be played down but for the time being everything is in the hands of law-makers.

English Daniela Konstantinova