The parliament tasked the government with drawing up a compensatory mechanism for non-residential customers due to high electricity prices

With 185 votes "for" and 5 "abstentions", the deputies of the National Assembly instructed the Council of Ministers to resume the program for providing compensations related to the prices of electricity to non-domestic end users.

The amendment made during the debates by the People's Representative from PP-DB Radoslav Rybarski to include in the text a "compensation mechanism for energy-poor domestic consumers" was not accepted.

The decision of the National Assembly stipulates that the compensation is in the amount of 100% of the difference between the real average monthly exchange price of the "Day Ahead" market segment of BNEB for the relevant month and the base price in the amount of BGN 180/MWh for end customers connected to high, medium and low voltage. However, this price will not be paid to non-residential consumers below the respective base prices. The decision also provides for how the compensation will be calculated.

In addition, the decision foresees that the funds will be provided by the EFSI, which is fueled by earmarked contributions from relevant market participants. The program excludes non-residential customers such as hospitals, schools, etc., for which a similar program already applies.

In their reasons, the deputies indicate that from the beginning of July 2024, there is a tendency to increase electricity prices on the free market in Bulgaria and the region. In the month of July 2024, the "day ahead" market segment reached record high electricity prices - for July 19, 2024, a price of BGN 1,705.72/MWh; for July 20, 2024 in the amount of BGN 1032.44/MWh; for July 22, 2024 in the amount of BGN 1662.46/MWh. The average price of electricity in Bulgaria is the third highest in the European Union, after Hungary and Romania, even exceeding the price levels of the traditionally expensive electricity markets of Italy and Greece.

Expectations for the month ahead are that these price levels will be maintained. According to the European Energy Exchange, the settlement prices of energy futures in Bulgaria for 23.07.2024 are as follows: August – BGN 200.92; September – BGN 175.63; fourth quarter – BGN 193.41

The increase in electricity prices is a result of electricity shortages in some regional markets, reduced intersystem transmission capacities between countries in South-Eastern Europe, breakdowns and planned repairs of base capacities in the region, as well as extremely high temperatures, which caused record high consumption in the summer season (a load of 5500 MW was registered).

As a result of these factors, which are beyond the control of market participants, and given the fact that the majority of electricity on the free market in the country is traded on the "day-ahead" exchange segment, extremely high electricity prices are formed. High prices create an economically unfavorable environment, negatively affect the Bulgarian industry and generate additional inflation.

To limit the negative consequences of high electricity prices, we propose to promptly implement a compensation mechanism for final non-residential customers from July 1, 2024 to December 31, 2024.

The proposed mechanism provides for compensation in the amount of 100 percent of the difference between the real average monthly exchange price of the "Day Ahead" segment of the Bulgarian Independent Energy Exchange for the relevant month and the base price in the amount of BGN 180/MWh for final non-residential customers, regardless of which network are joined.

The funds for payment of the compensations are provided by the targeted contributions collected in the Electricity System Security Fund. The proposed measure is a logical continuation of the series of measures aimed at protecting economic balances and macroeconomic stability by preserving the competitiveness of Bulgarian industrial enterprises and limiting inflation.

During the meeting, the Minister of Energy Vladimir Malinov expressed the opinion that the proposal of the National Assembly can be implemented and has the necessary financial resources. Accordingly, it will be coordinated with the European Commission, to which a notification request will be made. Later in the debate, in response to a statement by PP-DB MP Asen Vasilev regarding regulation, Minister Malinov commented that "this does not mean that a compensatory mechanism cannot be made". As an example, he gave the actions of Bulgaria's two neighboring countries in this direction - Greece and Romania - as well as the measures taken by the state to cap revenues.

In the framework of the debate, as it has already become clear, PP-DB MP Radoslav Rybarski made a proposal in the draft decision to include a text obliging the government to prepare a compensatory mechanism for energy-poor domestic consumers. He referred to the existing definition of energy poverty adopted by the previous regular government and the upcoming full liberalization of the electricity market from next year. In addition, he advocated that businesses should not get used to compensation. The parliamentary group of Vazrazhdane expressed support, but it was not enough to get enough "yes" votes. Dragomir Stoynev from BSP reminded for his part that when the market is distorted, the state intervenes. Delyan Dobrev from GERB-SDS commented during the debate that such a text will only confuse the Council of Ministers.