site.btaGovernment Mulls Reduction of VAT for Electricity - Energy Minister

December 8 (BTA) - The caretaker government mulls over a potential proposal on reduction of VAT for electricity to the National Assembly, caretaker Energy Minister Andrei Zhivkov said in a BTA interview. In his words, this cabinet is being in charge of the country amid one of the worst energy price crises in Europe in recent years.

The programme for compensating non-household electricity consumers with 110 leva per 1 MWh is an adequate response to the challenges the business faces. Parliament can build on that by introducing new measures, Zhivkov said.

He said that high electricity prices are not due to speculations or lack of rules. "This applies to all of Europe, not just Bulgaria. Energy futures prices indicate that the energy markets might calm down somewhat in the second quarter of 2022. However, the prices are unlikely to drop to pre-crisis levels", the Energy Minister stressed.

The government also mulls over a proposal for an amendment to the Energy Act, so that the Electricity System Security Fund could be used to compensate consumers during periods of extreme electricity prices like the current ones, Zhivkov said.

The government also considers the inclusion in the 110 leva per 1 MWh compensation programme of network operators to cover their technology costs, thus minimizing the effect of the expected increase of regulated prices as of January 1, 2022.

Unlike the rest of the EU citizens, household consumers in Bulgaria are on a regulated market and have not yet felt the price hikes in Europe. Heating prices, which depend on natural gas prices, are also determined by the energy regulator, the Minister added.

According to Zhivkov, another serious challenge that the caretaker government has managed to handle during its work is the submission of the National Recovery and Resilience Plan to the European Commission, thus starting the discussions over the future of Bulgaria's coal regions for real. In addition to that, the Energy Ministry has drafted a national energy strategy, as it was criticized for lacking one, Zhivkov noted.

Asked what his Ministry has failed to accomplish, Zhivkov said: "A lot of things for sure". One thing he mentioned was the construction project of the gas interconnector between Bulgaria and Greece, which is crucial for achieving real diversification in natural gas supplies for Bulgaria. According to him, work on the project could have been sped up.

Asked how coal-fired power plants will continue to operate after July 1, 2025, when the common EU framework requires that they no longer be granted state aid, the Energy Minister said that it depends on their good management. Coal-fired power plants should invest in ecological technologies to allow them to operate smoothly in the long run, he added.

Bulgaria's National Recovery and Resilience Plan says that 2038 is an indicative year for putting an end to the use of coal-fired power plants in the country. At the moment, coal power constitutes over a third of the energy mix in Bulgaria and quitting coal at once is impossible, Zhivkov stressed.

Renewable energy sources will be taking an ever larger place in the energy mix, but the economy cannot rely on renewable energy alone, he argued.

According to the caretaker government, the nuclear energy development in Bulgaria has no alternative. "Nuclear power plants are base powers that fully meet the challenges of the European Green Deal," Zhivkov said.