After consistently rejecting price increases demanded by state-owned gas company Bulgargaz and handing out single-digit hikes, the State Energy and Water Regulatory Commission (SEWRC) relented at the end of September and granted an increase of 23.9 per cent as of October 1.

It was lower than the 36.5 per cent demanded by Bulgargaz, the amount the company says it needs to stay afloat and avoid debts to Russia’s Gazprom, but the regulator agreed in principle to raise the price again in January. Should international fuel prices and the US dollar exchange rate remain at their current levels, the regulator will have to allow a further 21.4 per cent increase at that point, Economy and Energy Minister Petar Dimitrov said on September 30. An increase of that magnitude would signify a 50 per cent hike in the prices paid by end-users, all in space of three months.

Rising prices will hit industry and households equally hard, prompting labour unions and employers’ organisations to oppose the hike during the September 30 meeting of the consultative council that brings together Government officials, labour unions and employer organisations. While employers warned that the drastic price increase threatened to put a large part of Bulgaria’s industry out of business, the labour unions threatened to take SEWRC to court.

The hike would have an immediate impact on the consumer price index, raising inflation by 1.5 percentage points, Luchezar Boganov from think-tank Industry Watch said, quoted by Dnevnik daily. The ripple effect will affect the entire economy, but the steel, chemical and glass industries stand to take the worst blows. Heating utilities, which rely heavily on gas, are already in line for a 10 to 12 per cent hike as of November 1, but it would not cover the full extent of the gas price hike. Heating utilities would need to raise their prices by 35 per cent to compensate for higher gas prices, heating utilities association chairperson Valentin Terziiski was quoted by website mediapool.bg as saying.

Dimitrov countered by saying that at 538.66 leva a 1000 cu m of gas, the new price ceiling approved by the regulator, the amount paid by end-users was still lower than Bulgargaz paid Gazprom for it. “We reached an agreement between the state, SEWRC and Bulgargaz. Everyone must be clear that until January 1 next year, the price at which the gas will be sold in the country will be lower than the price it is bought for at Bulgaria’s border. That’s the most that can be done,” he said, as quoted by mediapool.bg.

The deal with Gazprom itself has become the latest pretext for the opposition to attack the ruling majority. The Economy Ministry has persistently refused to make it public, only to admit later that a contract published by Kapital weekly was indeed genuine. The new deal with Gazprom was negotiated by then-economy minister Roumen Ovcharov in December 2006, replacing a contract valid until 2010, and has already caused Bulgaria a loss of 500 million leva from the price increases, right-wing Union of Democratic Forces MP Martin Dimitrov said.

Ovcharov, now the chairperson of Parliament’s budget and finance committee, has countered by saying that the short-term losses were negligible compared to the long-term benefit of higher transit revenue, which he estimated at $4 billion until 2030.