OCTOBER 1 brought bad news for consumers as gas monopoly Bulgargaz increased prices by 18.11 per cent and electricity tariffs for small businesses went up by 16 per cent.
Meanwhile, forecasts are that inflation could reach 4.5 per cent by the end of the year, and economic growth could slow down.
The new price ceiling at which Bulgargaz can sell natural gas to public suppliers and consumers connected to the gas transmission network is 276.91 leva without VAT for 1000 cubic metres of gas. Consumers connected to the gas distribution network will pay 284.62 leva (VAT excluded) for 1000 cubic metres of gas.
Initially, Bulgargaz demanded a price increase of 22.7 per cent. The State Commission on Energy and Water Regulation (SCEWR) countered that natural gas consumption in the fourth quarter of the year will be less than the company’s predictions.
The commission allowed an increase of four per cent less than that requested by Bulgargaz.
The price of natural gas is calculated according to the cost of putting it in the network and by the quantities which Bulgargaz supplies in terms of agreements nationwide.
If the price of natural gas were increased by 22.5 per cent from October 1, as Bulgargaz suggested, it would still be about seven per cent below Europe’s lowest price in the third quarter. It had been suggested that the price should be 287 leva for 1000 cubic metres of gas, said Dimitar Gogov, sales and receivables collection head at Bulgargaz.
The comparison does not include Russia, Ukraine and Romania – the only European countries where natural gas prices are lower than in Bulgaria, according to Gogov.
Bulgaria’s natural gas requirements are met by external suppliers. Contracts with them and price formation dictate the need to change gas prices.
Meanwhile, power prices for low-voltage consumers in the corporate sector in Bulgaria rose by up to 16 per cent from October 1, while prices for households remained largely unchanged.
Despite calls from the recently privatised power distributors for higher prices for household consumers, SCEWR decided that such a hike would be too much for the population to live through in a country where the average monthly salary is about 300 leva.
Prices for mid-voltage consumers in the corporate sector rose by five per cent.
Although the prices for households remained unchanged, the power hike for businesses, combined with the upsurge in the natural gas cost, is certain to pump up inflation in Bulgaria by the end of 2005 and in early 2006, when another blow is expected to come from the new higher excise duties to be introduced in line with European Union requirements.
Because of the new price of natural gas, the prices of central heating in Bulgaria will go up this winter, hitting many households hard. Although only about 20 per cent of the country’s population uses central heating, the other 80 per cent will not be spared, because they will have to pay higher prices for electricity, coal, wood or liquid fuels.
Power and gas price increases are severely hitting small and mid-size businesses in Bulgaria, which have voiced concern about the increases.
More than 350 workers at Kaolin AD, a company for extraction of non-metalliferrous materials, salt and other raw materials for chemical fertiliser production, protested on October 3 against increased prices of fuels. In a declaration to the Cabinet, they said the higher natural gas prices would lead to an increase of Kaolin’s production costs of more than three million leva. About 50 per cent of the price cost is based on natural gas and electricity prices. The company has demanded that the enterprises are compensated through tax mechanisms.
The increase in natural gas prices will prompt increases in chemical fertiliser prices by about 13 per cent on the domestic market, and will also hit the still-competitive production that Bulgaria offers to EU markets.
Although denying any compensation to businesses for the new prices of power and gas, the Government said on September 29 that by the beginning of the winter season it would establish ways of compensating socially-disadvantaged households and the public sector for the increase.
Economy and Energy Minister Roumen Ovcharov quoted forecasts according to which the mark-up of fuel prices would cause inflation of 3.5 to 4.5 per cent by the end of the year, which would result in shrinking of consumption and, possibly, in retardation of economic growth by 0.2 to 0.3 per cent.
The increase in fuel prices will have the worst effect on consumers of low-voltage electricity – meaning about 500 to 7000 small and mid-sized enterprises. However, no compensation is envisaged for them, Ovcharov said.
