Kapital weekly newspaper,
issue 39

Frosty winter is around the corner and could bring the hottest season for the coalition Government.

Because heating utility Toplofikatsiya cannot repay its debt for natural gas, the Government may be left out in the cold. Bulgargaz is under pressure to collects its debts so that it can pay Russian supplier Gazprom. Bulgargaz currently supplies more than 600 000 households around the country with heat, and if a significant proportion of them are left in the cold, this will spell not only shortages but also social discontent.

It is possible that Bulgargaz is threatening to shut off supplies to scare Toplofikatsiya into submission and force them pay at least some of its accumulated debt. After a week of negotiations, the three most threatened regions - Bourgas, Pleven and Vratsa  - apparently were spared the chop as they found a way to repay their current obligation of seven million leva. It was a temporary solution, however, because it will only defer the problem for a few months, during which debts will continue to accumulate and Toplofikatsiya will once again fail to collect payment from consumers on time.

Gas supplies to Toplofikatsiya Sofia already have been reduced, which means that even paying customers in the city will experience cold months this winter. They will be paying more for an inferior service, while bills will increase by 10 to 12 per cent.

Economy Minister Petar Dimitrov is unlikely to allow Bulgargaz to leave Toplofikatsiya exposed, but this will not solve the country's ongoing problems with heating utilities.

Toplofikatsiya had until October 1 to clear its debt to Bulgargaz or it was faced with having to operate on a reduced supply. Alternative fuel supplies are virtually unavailable and the "emergency scheme" of Toplofikatsiya Sofia consists of fuel which is twice as expensive as natural gas and can supply the city for only five days in case of emergency.

In other towns in Bulgaria, privately-owned energy companies pay the obligations of local municipalities to Bulgargaz and so far have not had any supply problems.

However, these companies have unpaid debts to other suppliers. In Shoumen, for instance, the local Toplofikatsiya might cease operations at any moment. In Pernik, operations could also cease because of unpaid bills, much like the fiasco in Sofia. Heating companies linked to prominent businessman Hristo Kovachki said that supply might be halted because procedures to obtain funds through legal means had stalled.

Under court pressure, the Bourgas Toplofikatsiya managed to gather 4.3 million leva in 2008, which was half of the amount owed. Meanwhile the Competition Protection Commission has started investigating Toplofikatsiya Sofia for monopolistic activities and for illegally cutting off heating to all customers in apartment blocks irrespective of whether their bills have been paid.

Petko Milevski, the executive manager said that "it might be unfair, but at least we have paid half of our debt to Bulgargaz".

It appears that in the coming month, consumers will be left with no option but the most expensive one - electric heating. In the urban environment of Sofia, where most apartment estates lack chimneys, coal and wood are simply out of the question. Moreover, those "alternative fuels" are expensive and cause significant pollution. Besides, using electricity for heating will put extreme pressure on the electric grid, and is very likely to overload it, causing even greater damage.

Most complexes in Sofia built in the 1970s use central heating, and if that is cut off, demand for electricity will triple, a scenario not planned for by electricity distributor CEZ.

The serious problems that could be caused by power cuts means that it is imperative for Sofia, Vratza and Pleven to find a solution to the impending financial crisis.

Soon, Sofia might part ways with Toplofikatsiya and seek alternative sources of supply in the form of Overgas, for instance, which already has an established grid system in some areas of the city, and the corresponding logistical infrastructure. The main concern for consumers is the relatively steep initial investment - the installation of such a system in a 100 sq m apartment to handle the heating and water capacity would cost about 2413 leva. However, in a few years savings would mean that the investment had paid off.

There is an easier solution to avoid the vicious circle of debt. First, more flexible policies, allowing consumers to pay as much as they can, whenever they can. Second, investments are urgently needed to renovate and modernise the installations. In this way, the heating utility companies will easily have access to pipes that would be outside apartments, and the utility would be able to cut off supply to a specific customer without having to shut down the supply for the entire building. Energy theft will also be reduced, and consumers will have strong motivation to pay their obligations on time. Finally, if dissatisfied, a client unhappy with a provider would have the option of choosing another company.

In Parliament, it was suggested that new legislation be passed so that payments are made on a collective basis in a region, and if two-thirds of clients in a particular region fail to pay their bills, supply would be cut off.

This practice is common in other European countries but the argument is that it would be difficult to implement in Bulgaria. Committees in charge of such payment arrangements rarely reach consensus and are difficult to organise.

The Government can, however, speed up the gasification in the country's cities and towns and regulate prices, implementing methods to stabilise the cost and make it parallel the price of natural gas, with both prices corresponding to actual market value.