BULGARIANS are facing one of their toughest winters since the last major economic crisis of 1996-1997, because of rising central heating prices for households and electricity used by small and medium sized businesses.

The State Commission on Energy and Water Regulation (SCEWR), which exercises control over energy prices in the country, said on September 16 that it had allowed Bulgargaz, the state-owned gas importer and distributor, to increase its prices for fuel by 22.5 per cent. As a result, central heating and hot water tariffs are expected to jump by five to seven per cent from November 1.

In Sofia, the heating price will rise from 12 to 13 leva for a megawatt-hour. Toplofikatsia Sofia, the capital’s heating company, has already applied to SCEWR for a hike in its tariff. The company said that if permission was refused, it risked losses of more than 10 million leva each month.

The natural gas price increase is justified by record high prices on the international market. Bulgargaz said the price of the gas was also tied to international oil prices and the exchange rate of the US dollar against the euro, under a contract with Russia’s Gazprom, which is the main if not the only supplier of natural gas for Bulgaria.

SCEWR said earlier in September that it was considering an increase in power prices for industrial consumers by up to 16 per cent from October 1, leaving prices for households unchanged. The act defied calls to increase prices for households but leave industries untouched from recently privatised power distributors.

In spite of the fact that prices for households are to remain the same, consumers are going to be exposed to serious inflationary pressure this winter because businesses will calculate their new power costs in the prices of goods and services.

Business people are opposing the price hike decision, claiming it contradicts Bulgaria’s energy strategy, which says that household electricity prices should be higher than industrial prices. They said the increase was contradictory to economic logic, discriminated against them, and threatened to diminish the effect of the record-high economic growth, which according to the National Statistical Institute (NSI), reached 6.2 per cent in the first half of 2005.

More than 80 per cent of the country’s population, which has no access to central heating but uses electricity in the winter, would be deprived of its current pro-social tariff with lower prices for the first 50 kilowatts of power used each month. This type of social assistance will be eliminated as of October 1.

In more disturbing news, the NSI announced that heavy floods that boosted food prices and the rise in global prices of fuels brought Bulgaria’s monthly inflation up to 0.6 per cent in August from 0.1 per cent a month earlier.

Food prices, which usually fall during the summer due to cheaper fruits and vegetables, rose by 0.7 per cent in August as heavy rains and flooding damaged farm produce and killed livestock.

Non-food prices rose by 0.9 per cent driven up by a rise in fuel and energy prices. Service prices edged up by 0.1 per cent last month.
New prices of power and central heating are expected to further feed inflation by the end of 2005 and early 2006, accompanied by other factors, including higher excise duties the country would charge from January 1 next year in line with its European Union-aligned tax policy.

Higher fuel prices, due to excise duties or international trends, would certainly impact almost the entire scope of goods and services offered on the local market.

Fuel prices have a partial effect on 17.6 per cent of the consumer market, a section that also comprises housing, maintenance, water and power costs. Fuel prices also affected transport costs, which accounted for 6.8 per cent of the consumer market.

Transport companies have already started pressing for measures to ease the effect of the pro-inflationary fuel prices. Their efforts however, seem to be in vain, as the Cabinet was not planning to compensate for the expensive fuel, as had been done in many Western countries. The state that adopted such measures were not affected by floods and disasters like Bulgaria, said Economy and Energy Minister Roumen Ovcharov, dispelling the hopes of businesses.

Victory on ‘foreigner prices’

BULGARIAN and foreign tourists will pay the same prices for using services in tourist resorts, according to amendments to the Tourism Act, approved by the Cabinet on September 21. 

“The double standards in prices will be forbidden at resorts,” Culture Minister Stefan Danailov said after the Cabinet meeting.
He said that there would be fines from 1000 to 15 000 leva for violating the rule.

The practice of charging different prices for foreigners and Bulgarians has been the subject of continuing resentment among foreigners. In spite of a Cabinet directive in December 2004, the practice has continued to be widespread in many places, including resorts and state-run museums.

The Cabinet also decided to establish a Tourism Agency to monitor the quality of tourism industry services.