30% Price Increase of the Blue Fuel
The Energy and Water Regulatory Commission (EWRC) approved the price of natural gas for January. It amounts to BGN 133.41 / mwh. This was announced by the press center of the energy regulator. According to the EWRC, rising natural gas prices urgently require the establishment of a mechanism to compensate district heating companies so that they can continue their normal operations during the autumn-winter season.
The Energy and Water Regulatory Commission adopted a decision in connection with the application submitted by Bulgargaz for approval of a price for January 2022, at which the public supplier will sell natural gas to final suppliers and to the persons licensed for production and transmission of heat energy. The decision was made in accordance with the terms of the contract between Bulgargaz and Gazprom Export LLC, the terms of the contract with the Azerbaijani company and the agreements to it.
The Commission's decision approved the price of natural gas proposed by Bulgargaz on 01.01.2022, updated with the market indices of the European gas hubs as of 31.12.2021, with the average monthly exchange rate for conversion of the euro into US dollars. The European Central Bank for December 2021 and the average prices of alternatives to natural gas, fuels: 1% sulfur fuel oil and 0.1% sulfur gas oil as of 31.12.2021. The updated price statement of the public supplier includes the quantities of natural gas under the exemption program, under the contracts with the licensees, as well as with customers at freely negotiated prices are also reported.
After analysis of the current data and documents submitted by Bulgargaz and after calculations made according to the price model, with the adopted decision EWRC approved the price of natural gas from January 1, 2022 in the amount of BGN 133.41 / MWh (excluding prices for access, transmission, excise and VAT). For the previous month of December the price approved by the regulator was BGN 102.33 / MWh.
The increased price of natural gas for January is a result of rising prices on the international gas markets in the period after the submission of the application of Bulgargaz on 10.12.2021, in which a price of BGN 117.12 / MWh was proposed. At the open meeting on December 29, 2021, the company presented data on quotations, which show that during this period the prices of natural gas on the European gas markets were very dynamic and on certain days reached historical levels of 180 euros / MWh. According to the public supplier, despite the increase compared to the price in December, the price of natural gas for Bulgarian consumers remains 35% lower than the prices of European gas exchanges. As a result, the financial benefit for household and business consumers for the whole of 2021 amounts to BGN 675 million.
The approved price of natural gas of BGN 133.41 / MWh includes the component price of natural gas at the entrance of the gas transmission networks, the component for the activity “public supply” under Art. 17, para. 7 of the NRCPG and the component for compensation of expenses under Art. 11a, para. 2 of the NRCPG, covering the costs of Bulgargaz for storage of quantities in the underground gas storage Chiren in fulfillment of obligations under the Emergency Action Plan.
The EWRC has the authority to approve the price of natural gas upon an application submitted by the public supplier. Based on the data and documents provided with the application and after checking the calculations, the Commission approves the price of natural gas for the month, which is applied from the first day of the month, according to Article 30, paragraph 1, item 7 of the Law on energy. In approving the price of natural gas, the EWRC shall take into account the stated projected quantities of natural gas from imports for the domestic market and from natural gas reserves, the terms of contracts for supply from imports for the domestic market and the BNB average exchange rate of BGN against foreign currency which is paid for the natural gas imported into the country. The powers of the Commission are only to establish whether the application of Bulgargaz meets the requirements of Ordinance № 2 on the regulation of natural gas prices and supply contracts.
In determining the expected delivery prices in connection with the formation of the entrance price of gas transmission networks, according to Art. 17, para. 3 of the NRCPG take into account the total amount of natural gas planned for delivery in January 2022 and the relative share of the quantities for public supply of natural gas, the natural gas release program, as well as under bilateral agreements.
At today's meeting, the Chairman of the EWRC, Assoc. Prof. Ivan Ivanov, commented on the price decision that, despite his wishes, the regulator does not have the levers to limit the rise in the price of natural gas. He expressed concern that the continuing rise in the price of natural gas, which is entirely due to external factors, puts in an extremely difficult situation district heating companies that use natural gas as their primary energy source, and it should be borne in mind that this fuel forms 60-70 percent of the price of the district heating service. Assoc. Prof. Ivanov pointed out that after the decision of the National Assembly on the moratorium on heating, electricity and water supply prices, these companies continue to provide heating services at natural gas prices as of July 1, 2021, while at the same time the price of the blue fuel paid by them has increased almost three times so far.
In this situation, according to the energy regulator, it is imperative to urgently approve a mechanism to compensate district heating companies and all other consumers of natural gas in the country. This is especially important for district heating companies because it will allow them to continue their normal operation during the autumn-winter season and to provide heat to a large number of consumers in Sofia and other major cities. Otherwise, the companies may be unable to pay with Bulgargaz for the natural gas they purchase. In turn, this will make it difficult for the public supplier, who according to the supply contract must pay in advance for the delivered quantities of natural gas. As a result, it is possible to reach heavy intercompany indebtedness, which poses risks to the entire energy system and the country's economy, said the EWRC chairman.
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