Bulgaria ranks among eleven EU member states suffering from deficits in power tariffs, the European Commission believes.

In a report issued last week, the EU's executive body recommends that electricity prices be hiked to address flaws in financing of power system.

A footnote accompanying a table on the "scope of tariff deficit" (p.23) reminds that In Bulgaria, the three largest distribution companies owe a combined 347.6 million lev (7 million) to the state-owned National Electricity Co. (NEK) due to disbursements for subsidies to renewable and combined heat and power generators since 2010.

The reports says Bulgaria, alongside Malta, has "shortfalls of revenues in the electricity system because the regulated integral electricity tariffs for consumers (especially for households) are too low to cover the corresponding costs borne by the utilities," the Commission's assessment reads further.

Bulgaria, in addition, falls in the group of "six countries with the most evident tariff deficit" that also includes Spain, Portugal, Greece, France, and Malta.

The Commission notes that the development of renewable electricity generation should not be pointed as the main cause for tariff deficits, since "the share of [wind and solar power] technologies in Greece is close to the EU average, while in France, Bulgaria and Malta the share was below EU average."

"Electricity prices for household consumers in Bulgaria are regulated. The country has an integral electricity tariff covering all electricity costs including energy generation, transmission, distribution, supply, and support to renewables etc.," the document continues, adding "retail prices for households are in nominal terms by far the lowest in the EU and hardly changed between 2008 and 2012."

The country has now to repay investment in wind and solar power, estimated at over EUR 4 B just "over the last year", by surcharges on electricity prices.

The Commission quotes again the World Bank as saying "the integral tariff is not sufficient to match the corresponding costs" of utilities.

In Bulgaria, on the other hand, the tariff deficit "is not recognized by the authorities as a public liability". Lack of accounting standards for regulated utilities, lack of cost benchmarking, as well as by market distortions such as cross subsidies and purchase power agreements, are cited as other major flaws.

EU's executive body reminds that the attempt of Bulgaria's energy regulator DKEVR to push prices up by 14 percent as of January 2013 "triggered dramatic street protests and finally led to the resignation of PM [Boyko] Borisov in February". A 13-percent gradual cut of electricity prices was observed later during the year.

As Bulgaria has an excess generation capacity, one of the cited recommendations of the World Bank is "to facilitate exports which would require better interconnections" as a possible move to tackle the financial difficulties of the power sector. 

Dating October 3, Friday, the report's publishing follows a decision of Bulgaria's energy watchdog DKEVR to raise electricity prices by nearly 10 percent.