Bulgarian government approves plan to offset high energy prices

SOFIA (Reuters) – Bulgaria on Monday approved a new stimulus package to shield companies from the surge in energy prices bolstered by the war in Ukraine, Prime Minister Kiril Petkov said.

Under the plan, the centrist government will continue to partially compensate businesses for high electricity costs and fully cover the 14% increase of natural gas prices in May after Russia cut gas supplies to the Balkan country last month.

The government, under pressure from business associations and trade unions, said it also plans long-term solutions to protect the economy from the high energy costs which include windfall taxes on state energy producers.

“We have agreed compensations for May and June. This will alleviate the concerns of the Bulgarian business,” Petkov said after meeting with leading employer organisations and trade unions.

Bulgaria has frozen regulated electricity prices for households at their levels from last July and has been compensating companies for high energy costs since October.

Under the plan, the government will cover 80% of electricity prices that come above 200 levs per megawatt hour for businesses. The average electricity price on the Bulgaria power bourse’s day-ahead platform was 468 levs per MWh on Monday.

The European Union’s poorest member state was meeting over 90% of its gas needs from Russian gas imports until April 27, when Gazprom turned off the tap over Bulgaria’s refusal to pay in roubles.

Sofia urgently secured alternative gas supplies from Greece and has not cut deliveries to clients, but the price came at a premium. The government has now pledged to fully cover the increase.

The government has arranged U.S. liquefied natural gas deliveries for June and is working on a long-term deal with U.S. companies that should bring lower prices, Petkov has said.

The Black Sea country, which consumes about 3 billion cubic meters of gas per year, will also start to receive 1 bcm from Azerbaijan from July. At present, it only gets about one third of that amount under a long-term contract.

The new measures are not expected to affect the government’s target for a fiscal deficit of 4% this year for the time being. The government said if any further stimulus measures linked to natural gas deliveries are needed they would by covered by the state budget.

(Reporting by Tsvetelia Tsolova, editing by Ed Osmond)