The draft decision of the DCEFR to reduce the price of electricity from 1 January 2014 will lead to another reduction in the funds for servicing and maintenance of electricity distribution networks

For the third time in the last 10 months, the Regulator introduced restrictions on the financing of the activities on which the quality electricity supply of final customers depends

The adoption of the draft ECHR decision would deepen the complex financial situation in which the previous two price decisions of the Regulator (dated 05.3.2013 and 29.7.2013) placed the electricity distribution company and the final supplier company in the ENERGO-PRO Group. The reduction in the price of electricity in March and August exhausted all available reserves in the company, and at the moment there can be no talk of “newly opened reserves in the ERPs”, since they are entirely at the expense of investment opportunities and the level of maintenance of the electricity distribution network and customer service.

For 8 years now, the electricity distribution and supply company serving North-East Bulgaria have reinvested their profits in order to be able to maintain the service of their customers within the framework of both the legal regulations and the highest technological standards. At the same time, over the years, the DCEFR left unresolved financial cases for many millions, despite the requirements of the Energy Act that the inherent and necessary for the activity costs of energy companies be covered by the price of electricity. For example, since the price decision of DKEVR in 2012, the company accumulated huge losses from unreimbursed costs for “green” energy, which the electricity companies are obliged by law to buy and which in ENERGO-PRO Sales reached the critical level of 46.4 million. As a result of the price decision of DCEVR of March 2013, which reduced the price of electricity for domestic consumers by more than 6%, the available funds for network maintenance and customer service activities were reduced by 24.6 million leva in respect of ENERGO-PRO Networks. The negative results of this reduction were borne solely by the electricity distribution and supply segment, instead of being proportionally and fairly distributed to all actors in the production-transmission-distribution chain.

Added to the additional financial burden on the activities of electricity distribution and service to the final customers were the costs of maintaining the grid and investments in the amount of over BGN 60 million not recognized in the pricing decisions of 29.7.2013, as well as the financial consequences of the cancellation of the access fee that the producers of “green” energy paid in the energy system.

The intention announced by the Chairman of the EBRD on 1 January 2014 to reduce the costs of technological losses of ERPs by 2% would have a direct negative effect on the maintenance and rehabilitation of the medium and low voltage network in the territory served by ENERGO-PRO in the amount of BGN 14.4 million. This is the third price reduction in the last 10 months, which is planned without an analysis of its impact on the activities of electricity distribution companies and without examining the possibilities of electricity distribution and supply companies to sustainably fulfill their licensing obligations. Companies carry out daily an activity that is related to real and demonstrable expenses such as material costs to carry out repairs, to eliminate accidents, for new customer joins, for wages, for the maintenance of specialized cars, etc. The constant reduction in the financing of these necessary costs limits the volume and quality of activities that the company can afford to carry out during the year, activities on which the safety, stability and quality of energy supply for citizens and companies depend.

The argument of price reductions with the existence of “reserves” in electricity distribution companies does not reflect the real facts and creates a public misconception of the real financial situation in the energy sector.

With regard to the volume of financing of electricity distribution networks, it should be noted that today electricity distribution companies receive almost five times less share of the financing of the energy sector through the bills paid by customers compared to the time when the same companies were state-owned. For comparison, in 2005 the electricity distribution company in North-East Bulgaria received nearly 33% of the electricity bill of its customers. In 2013, this share fell almost fivefold to 7.6%.

The introduction of the price change for one, moreover, holiday day entails a technological impossibility to implement the decision without violating important provisions of the General Terms and Conditions of ENERGO-PRO Networks. So, for example, according to the General Terms and Conditions, a certain group of customers with higher consumption must necessarily be taken into account before the effective date of the price change, if it is in a downward direction. DCEFR announced its intention to adopt the decision to reduce the price on December 30 and enter into force on January 1, 2014. This means that within one day (the holiday 31 December) the company will report nearly 66,000 electricity meters spread over an area of 40,000 square km. This means determining the work routes of hundreds of accountants, and it would not be possible in reality, since on December 31 the vast majority of customers with higher consumption (firms and enterprises) will not work and the accountant, even if he manages to visit the site, will not have real access to the electricity meter.