With the adopted new electricity prices effective July 1, DKEVR puts at serious financial risk the operator of the electricity distribution network in North-East Bulgaria ENERGO-PRO Grids AD and the final supplier ENERGO-PRO Sales AD

The financial deficit in the companies amounted to over BGN 100.4 million. ENERGO-PRO will appeal the new prices because they violate the legislation on pricing in energy

On June 30, 2014, the State Commission for Energy and Water Regulation (EWRC) approved electricity prices from July 1, 2014. The parameters set out in Decision C-012/30.06.2014 will deepen the financial deficit in the energy system and increase the risk of destabilization of the electricity generation — transmission — distribution — supply chain. After the reduction of the company's revenues with the prices from 30.12.2013, the final supplier and the power distribution company of ENERGO-PRO were placed in a situation of survival, which is aggravated by the price decisions of the DKEVR from 30.06.2014

According to preliminary estimates, the financial deficit caused by the latest price decisions in the company amounted to over BGN 100.4 million. ENERGO-PRO experts calculate the indicators of the activity of the companies of the Group after the entry into force of the new electricity prices. In the coming days, the company will announce what will be the real impact of the price decision of DKEVR on the functionality and activity of the electricity distribution and electricity supply company in North-East Bulgaria.

The preliminary analysis shows that the new prices will have a sharp negative impact on the activity of ENERGO-PRO Networks AD. The company's prices for the services of transmission of electricity through networks at the medium voltage level were reduced by 31%, and for the transmission of electrical energy through networks at the low voltage level - by 36.5%.

In order to reduce the price of the electricity distribution company, DKEVR has unreasonably failed to recognize the costs that the company will inevitably incur in order to maintain the functioning of the grid in North-East Bulgaria. These are investment costs (BGN 28.9 million), depreciation expenses (BGN 5.6 million), operating expenses (BGN 667 thousand), etc. The total amount of unrecognized expenses amounted to BGN 48.8 million, and the return on the company's work pledged by DKEVR was BGN 27.8 million. Thus, DKEVR is betting in advance ENERGO-PRO Grids AD to generate losses in the amount of about BGN 21 million, which is in direct contradiction with the Law on Energy.

DKEVR unjustifiably deducted BGN 29.9 million from the necessary revenues of the electricity distribution company, as a sanction after a regulatory audit of the company. Since, as a result of the audit, no act was issued to establish an administrative offense, this sanction was imposed on the company in gross violation of the administrative process and legislation.

An additional negative effect on the work of ENERGO-PRO Grids will be the refusal of DCEVR to recognize the company's balancing costs, which amount to nearly BGN 9.5 million, which essentially constitutes a violation of the Energy Act and the Electricity Trading Regulations.

With the new prices, DKEVR reduced the revenues for the activity of the final supplier ENERGO-PRO Sales AD from 3% to 2%, leaving uncovered operating costs of the company in the amount of BGN 7.7 million. As in the case of ENERGO-PRO Networks, and in ENERGO-PRO Sales, the Regulator has not included in the recognized costs the balancing costs arising from activities legally imposed on the company and which are expected to be not less than BGN 45 million.

In total, ENERGO-PRO Sales AD was damaged by BGN 52.7 million without giving reasons for these adjustments.

“ENERGO-PRO Networks and ENERGO-PRO Sales constitute the end of the energy chain and are in direct contact with electricity consumers. Our share in prices is less than 9% and the revenues we will receive after July 1 are insufficient to increase quality and effectively reduce the emergency in the most resource-intensive activity — that of the electricity distribution company. Everywhere in industrial nations, the practice is to remain at the end of the chain more than 25 - 30% of revenues, which guarantees the creation of electricity distribution infrastructure that can provide the conditions for industrial growth and investments. “, said Stefan Abadzhiev, Manager of ENERGO-PRO Varna. “With this pricing solution, DKEVR fills financial deficits in state-owned companies at the expense of distribution networks, from which end customers cannot but suffer. We will appeal the decision to the competent authorities because we believe that Bulgarian laws and European directives are written to protect the common interest and must be respected by everyone, including the Energy Regulator.”

With the latest price decision, DKEVR supports the state-owned companies NEK EAD and ESO EAD and reduces their financial deficit, but this is done entirely at the expense of the other participants in the country's electricity system, which inevitably has a negative impact on it, including on the quality and stability of supplies. With the unilateral support of these companies, an unmeasured financial burden is imposed on network companies and end suppliers who have direct contact with consumers and take care of their service.

Against the background of drastic reductions in revenues of distribution companies and final suppliers that directly serve customers, the price of electricity provided by NEC EAD increased by 13.6%, and the price of ESO EAD for transmission and access - by 15.5%.

The scheme introduced on July 1 to distribute the revenues of companies in the energy system calls into question the daily and necessary activities of electricity distribution companies such as expanding the existing network to join new customers, troubleshooting and maintaining basic services such as a 24-hour telephone line and customer service centers.