Households pay BGN 150 more for heating for the whole season
The use of natural gas is again cheaper than heating
Gas is cheaper and steam more expensive
We will pay shock bills for heating in the coming months, and one of the reasons for this is the desire of the Minister of Finance Asen Vassilev to fill the state budget. If you heat with gas or wood, you will pay less this winter. But bills will go up for people with heating and air conditioning.
People with heating will pay just over 10% more for heating in winter, despite the sharp drop in gas prices compared to last year. The price of the heating itself was increased minimally. But the Ministry of Finance and the MPs decided that for people with heating there is no need to have a reduced VAT rate, as was the case in the last heating season. For restaurants, the lower VAT of 9 per cent remains, but for people with heating, the standard rate of 20 per cent has been returned, which will lead to an increase in bills.
For example, if last year a family paid BGN 390 for an apartment of about 80 square meters in Sofia during the coldest months, now they will have to pay BGN 430. The bills will be smaller, only if the weather cooperates warmer than last winter.
As a result of lower gas prices, firewood and pellets can now be found at lower prices than last year. Heating with wood and eco-briquettes is cheaper than heating, according to “Trud news” calculations. Heating with natural gas is slightly more expensive than using wood and eco-briquettes, but this year it will also be cheaper than heating.
In November last year, “Bulgargaz” sold gas at a price of BGN 123.87 per megawatt hour without excise duty and VAT. At the moment, the price of “Bulgargaz” is significantly lower – BGN 88.61 per megawatt hour, which leads to a decrease in the price of the fuel that reaches households. The price of gas is even lower than in November 2021, when it was BGN 93.19 per megawatt hour. But in November 2021, the price of heating in Sofia was BGN 98.48 per megawatt hour, and now the price is BGN 137.93 per megawatt hour. This represents an increase in the cost of heating by more than 40 percent within two years, given that the price of gas is now lower. As a result of all this, central heating is already too expensive for many households.
For an apartment of about 80 square meters in Sofia, during the coldest months of last year, bills came for about BGN 390. This winter, at the same temperatures, for heating the apartment, the household will pay about BGN 40 more compared to the same month last year . If last winter for the entire heating season the heating bill was BGN 1,500, this winter the household will have to pay about BGN 1,650, or nearly BGN 150 more. As such, this money will not go for gas, for salaries in heating or for repairs, but will directly enter the state budget, because this winter the increase in heating bills comes entirely from the return of the VAT rate to 20 percent. The idea of reducing the VAT for heating to 9% was that the lower rate would apply while the price of gas was at a record high. Now gas is much cheaper than last year, but the price of heating was not reduced, on the contrary – even without VAT, there is a minimal increase. But the Ministry of Finance decided that supporting households through a lower heating rate should end and did not propose an extension of the period of use of the 9 percent rate. In the case of restaurants, however, the Minister of Finance Asen Vasilev proposes to extend the effect of the lower VAT rate, and in addition, he proposes measures to bring the industry into the light. When paying for heating, however, measures to leave households in the light are not required, because they cannot escape paying VAT, and the higher rate of tax was returned.
Heating alternatives are not cheap either. Heating with diesel fuel is quite expensive, although it is cheaper than last year because fuel prices have calmed down a bit. Using an electric boiler or LPG for heating is cheaper, but the costs are also significant. It is cheaper to use firewood or eco-briquettes.
The situation will change with the launch of the free market
With air conditioning is still the best value
The investment will not be able to be repaid
Heating with air conditioning is still profitable, but as households enter the free electricity market, this will change.
Heating with air conditioning continues to be the cheapest. The reason for this is that modern air conditioners are extremely energy-saving and the ratio between released heat and consumed energy reaches 5 to 1. However, this depends on the energy class of the air conditioner. The most economical air conditioners are the hyperinverter ones. They have the highest energy transformation coefficients for heating and cooling. The initial investment for them is high, but it pays off over time. Heating with high-end air conditioners costs nearly twice as much as heating, and for an 80 sq. m apartment in the coldest months, it costs about BGN 200 per month.
The use of air conditioners is still profitable because the price of electricity for the household is determined by KEVR. Electricity prices are regulated, but this winter the bills of people heating with air conditioning will be higher because since July 1 the price of electricity for domestic consumers has been increased by an average of 4.4%. Traditionally, in recent years, they raise the price of heating and electricity in the middle of the year, when people do not pay heating bills. The situation will be similar in 2024.
Initially, the first step to liberalize the electricity market was planned to be from January 1, 2024, but the MPs decided to make it from July 1 next year. And from the end of 2025, households will switch entirely to the free electricity market, which may lead to a two- to three-fold increase in the price. Last year, due to the high prices of firewood, pellets and gas, many people bought air conditioners to make heating cheaper. Indeed, when using a high-end air conditioner, heating is now cheaper than with heating. But in just two years, the situation will be radically different. Household electricity will be much more expensive. For an investment in an air conditioner to pay off, it must be used for several years. But people who bought air conditioners last year may not have that option, because in two years they may have to go back to heating with wood because of high electricity prices.
Introduce a base price of electricity for households
From July 1, the government determines the price of electricity
The changes take effect from mid-2024.
From the middle of next year, the government will decide what the price of household electricity will be. This pricing scheme will continue until the end of 2025.
The government will decide what electricity bills citizens pay. This is what the new texts in the Energy Law say, which the parliament recently adopted again, rejecting the president’s veto on the changes.
From July 1, 2024, a base value of electricity per 1 megawatt hour will be set, which household consumers will have to pay. To this base price will be added the costs of the electricity suppliers with a corresponding rate of profit and thus the price of electricity for the household will be determined. From the middle of next year, electricity suppliers will buy electricity at market prices. And for the difference between the market price and the base price, compensations will be paid for households, as there are currently such compensations for businesses, if they buy electricity at a price above BGN 200 per megawatt hour.
The price of electricity for households from July 1, 2024 will be determined by a program of the Council of Ministers, the Energy Act states.
Households may not be compensated for high electricity prices for the full amount of electricity they use. The compensation can be for all or only a part of the purchased amount of electricity from the household end customers, the law states. In addition, the amount of compensation may be different according to the amount of electricity purchased. That is, for people with less electricity consumption, the compensation paid may be greater than for those who use more electricity. Everything related to the price of electricity for households will be decided by the Council of Ministers, and this will continue until the end of 2025. Then the compensations will stop and households will pay the market price of electricity.
Households in old housing with a greater chance of energy subsidies
Working people pay to get the money from the EU
Energy poverty by building type
There will be aid for the energy poor from the beginning of 2026, but who will be entitled to aid will be decided administratively.
Middle-income working people will pay the price for electricity market reform. For people with the highest incomes, it does not matter much whether their electricity bill is BGN 100, BGN 200 or BGN 300. For those with the lowest incomes, from the end of 2025, there will be benefits for energy poverty, the latest changes foresee in the Energy Act. But middle-income earners will have to pay significantly higher electricity prices.
During the debates in parliament to override the President’s veto on the changes to the Energy Law, both opposition and ruling majority representatives commented that the changes were made to get the next tranche of money under the Recovery and Resilience Plan. There is no end date for the liberalization of the electricity market in the EU directive. But in the Recovery and Sustainability Plan during the government of Kiril Petkov, a commitment was written in Bulgaria to introduce market prices for electricity by the end of 2025. And now, in order to receive the money from the EU, this commitment must be fulfilled.
The draft ordinance on energy poverty provides that assistance will be given to households that, after paying their energy costs, have per capita incomes below the poverty line. To determine the type of energy consumption, buildings are divided into five types depending on when they were built and whether they have been renovated.
People who live in old buildings have a much higher chance of falling into the energy poor group because their required “primary non-renewable energy” for a year is 400 kWh per square meter, the regulation states. In multi-family residential buildings that have been renovated to energy class B, the average annual consumption according to the regulation is only 135 kWh per square meter.
But the regulation is written so that annually they will administratively decide which people are entitled to energy poverty benefits and who are not. The “primary non-renewable energy” required for the dwelling, recorded in the regulation, will be multiplied by a factor taking into account the losses for extraction, production and transmission of energy. This coefficient will be determined by the Agency for Sustainable Energy Development. Given that household energy consumption does not depend on production and extraction losses, but on other things, such as whether they use a water heater or have hot water. As well as whether the home is located in the southern regions of the country, where it is warmer in winter, or high in the mountains, where the temperatures are lower. The typical energy consumption will not depend on whether the apartment has new joinery, whether the dwelling is brick or panel, whether the heating is wood, air-conditioned or steam, for old dwellings that have not been renovated, it will not matter whether it is house or apartment.