The constantly increasing debt of the state electricity company exceeds EUR 1.5 billion; the second most powerful in the Balkans Bulgarian power plant is to be closed down; banks once again refuse a loan to the Bulgargaz state owned giant, now suffering from Russian gas supplies; there is a large-scale HR castling at the board level… These are only some of the issues that threaten the entire Bulgarian energy sector. It is true that electricity supplies for business and households haven’t been cut off yet and Russian gas is still flowing along the pipes towards TPPs and individual consumers, but the entire system is threatened by a financial breakdown and the collapse might be expected any moment now. That was why one of the first steps of the new Energy Minister Temenuzhka Petkova was to order an urgent and full inspection of the entire energy sector, looking for the reasons for the lack of finances and the ways for recovery.

Respected energy experts and analyzers frame in their reports three main reasons for the crisis within the sector. They place first the inconsistent and populist policy of most governments over the past decade or so. Led by aggressive populism those rejected in a consecutive manner and against any economic logics, or blocked and even sabotaged the decisions of the so-called independent energy regulator. The latter insisted on such a level of the consumer’s price, allowing both power plants and energy distributing companies to function normally, to invest and to raise the quality of production and distribution.

The poor management of most branch companies and associations (still owned by the state) appears to be the second main reason for the crisis in the energy sector. Those involve political appointments at managing positions and decisions in favor of certain political parties and related business circles. There are tremendous abuses with financial assets and state procurements manipulated. To sum up – it’s all about unprofessional management and wrong decisions of the boards.

The third factor that can be found in the current cataclysms across the energy sector, which is due mostly to the first two reasons mentioned – these are the prices of electricity. Those do not allow producers and branch traders to function normally and to make enough profit, in order to be able to develop successfully and to offer product and services of a good quality.

On 1 January 2014 the price of electricity in Bulgaria was 45 percent lower than the average for the EU. It was three times lower on Germany and four times on the one in Denmark. This serves as a background to the unreal expectations of the society for endlessly low prices of electricity. This is one of the conclusions in an analysis of experts from the Risk Management Lab with the New Bulgarian University, headed by former PM Ivan Kostov. Bulgaria is among the 11 EU member-states with a “deficit” in the price of electricity and measures should be taken, a report of the EC claims. “Deficit” means here that the price doesn’t cover the real expenses of energy companies. Brussels recommends to the 11 members to cope with the issue, also with imposing and raising of tariffs and fees, combined with an increasing of energy benefits to the socially disadvantaged. However, as a great part of the population here can be called poor, the task looks practically unsolvable. That is the case with Bulgaria and so far no one can see light in the energy tunnel.

English version: Zhivko Stanchev