site.btaIndustrial Companies Bear the Brunt of NEK Deficit Remedy Push

Industrial Companies Bear the Brunt of NEK Deficit Remedy Push

Sofia, June 8 (BTA) - Energy experts are worried that industrial
 companies have to bear the brunt of the energy regulator's push
 to minimize the financial deficit at the National Electricity
Company (NEK), which will nevertheless continue to accumulate
due to huge imbalances. Reacting to an expected July 1 increase
in electricity prices proposed by the Energy and Water
Regulatory Commission (EWRC), professionals told BTA that the
government should devise a system to support a wider range of
low-income household users of electricity, while at the same
time opening up the electricity market and putting electricity
prices on a competitive basis.

NEK's deficit will continue to increase, though more slowly than
 now, Bulgarian Energy Forum Chair Ivan Hinovski said. Hinovski
believes that the measures taken by EWRC will only have a
temporary effect and will not actually solve the problem.

"The good news is that household electricity users will not be
affected too much by the effort to offset NEK's deficit as the
household electricity price is proposed to increase by a token 2
 per cent," Hinovski said.

He recalled his organization's proposal to set up a buffer fund
in order to reduce electricity sector imbalances. It should be
an internationally controlled revolving fund run by banks and
other financial institutions which will provide money on certain
 conditions, he explained.

The main goal should be to clear up NEK's deficit in a way that
is painless for both household and corporate clients, so the
electricity market can be liberalized completely. Over a certain
 period of time the fund could buy costly green electricity
while earning money by selling green certificates, Hinovski
recommended."It is a crime that trading in white and green
certificates has not been launched yet. This is a tool that
could reduce NEK's deficit by up to 200 million leva annually,"
he estimated. "The most outdated and erroneous approach would be
 to offset NEK's deficit with money from the national budget."

Energy expert Prof. Atanas Tassev told BTA that it is impossible
 to achieve balance under the circumstances because NEK's
deficit is too big. "The fact that NEK remains dissatisfied,
despite the measures taken by the regulator, and says that its
cumulative deficit will reach 1.8 billion leva by the end of
this year, shows that the situation is rather serious," Tassev
said.

He sees no risk of the Kozloduy Nuclear Power Plant failing to
raise money for the repair and upgrade of its reactors in order
to extend their operational period, considering that the plant
can sell two-thirds of its electricity via the free market. But
at 1.65 per cent, Kozloduy's rate of return is too low and is
decapitalizing the company, he warned. "The rate of return
should be high enough to allow the plant to take investment
loans," Tassev argued.

The liberalization of the electricity market will not be
completed until the middle of next year at the earliest, he
predicted. The new electricity price proposal made by the
regulator, EWRC, is based on the assumption that the regulated
market will be preserved for the time being, he noted.

In a report, EWRC projects that NEK will earn 2.539 billion leva
 in revenues during the pricing period between July and December
 2015, up by 346 million leva compared with July to December
2014. What is more, Energy Act amendments and falling natural
gas prices will lead to a reduction of NEK's expenses by 130
million leva, which means that the company's deficit will shrink
 by 476 million leva, according to EWRC's projections.

The regulator also says in the report that NEK can be expected
to make up for last year's financial loss of 644 million leva
because the company can take part in competitive bidding
organized by the Electricity System Operator for the right to
sell "cold reserve" electricity, and also because NEK has made
some price arrangements with two thermal power plants operating
under long-term agreements.