site.btaRegulator Postpones Sofia's Water Price Hike

Regulator Postpones Sofia's Water Price Hike

Sofia, March 10 (BTA) - The Energy and Water Regulatory Commission (EWRC) Friday postponed for the second time a decision to raise the price of Sofia's water by 18 per cent.

The Commission was expected to adopt operator Sofiyska Voda's business plan for 2017-2021 and the prices of water and sewerage services. Initially, Sofiyska Voda asked for a 32 per cent rise, but the regulator negotiated an 18 per cent price hike. Thus water in the capital would have cost 2.16 leva/cu m as of March, up from 1.82 leva/cu m now.

This calculation factors in a 17 per cent rate of return agreed by the concessionaire and Sofia Municipality, and failure to apply it may lead to the termination of the agreement. However, the regulator set an economically reasoned rate of return at 9.94 per cent in the spring of 2016, and now the question is which rate is applicable.

During EWRC's meeting, protesters warned that if the 18 per cent increase was approved, they would file an appeal against it. They argued that a 9.94 per cent rate of return would translate into a price increase of less than 9 per cent this year. Lawyer Milena Milanova said: "People don't realize that approval of an 18 per cent price rise in the first year goes hand in hand with a 47 per cent mark-up in the fifth year."

Engineer Ivan Ivanov of the Bulgarian Water Association commented on Bulgarian National Radio that the concessionaire claimed it needed the mark-up to form a sizable reserve. However, its purpose is not known, and at this stage the price customers pay for water would go mostly towards the payment of financial obligations. "However, I am concerned about the possible control of the use of this reserve, which will amount to 83 million leva in 2021," he said.

The company had proposed the following mark-ups: 32 per cent in 2017, 47 per cent in 2018, 57 per cent in 2019, 64 per cent in 2020, and 71 per cent in 2021.

The regulator cut the proposed increases respectively to 18 per cent, 27 per cent, 35 per cent, 41 per cent and 47 per cent.

On Thursday, EWRC Chairman Ivan Ivanov said he would make no statements until the March 26 parliamentary elections because the parties might try to capitalize on the regulator's decisions. No date has been set for the next meeting.

As to natural gas prices, Bulgargaz is expected to make its final proposal for a mark-up in the second quarter. Initially, the company wanted a price rise of 32 per cent, which was described as "reasonable" by Bulgarian Energy Holding Executive Director Petyo Ivanov.

However, EWRC urged Bulgargaz to lower its estimate because it would push up water and heating prices.