COMPETITIVE DISTRICT HEATING L.GEORGIEVA BULGARIA

1. COMPETITIVE DISTRICT HEATINGL.GEORGIEVABULGARIA

2. WHAT WAS DONE • Energy prices in line with the justified economic costs and phasing • Financial recovering and establishment of energy companies operating on a commercial bases • Property functioning regulatory authorities and mechanisms • Market rules and structures

3. Strategy • A review of the governmental role in the provision of energy services • Reforms with the main goal of deregulation - replacement of regulation with competition • BENEFITS- economic (cost minimization) and social (shift of savings to end prices)

4. Strategy • Strategy Document • Contents of this document • -district heating sector status • -reforms - financial restructuring, institutional changes, deregulation, legal changes, privatization

5. Pricing policy • Medium- term priorities • Reduction and phasing out of subsidies for energy • Introduction of regulatory rules for setting energy prices - electricity, heat and natural gas • Indicative schedule for the increase in electricity prices for the household sector

6. Pricing policy • Schedule for the increase in heat prices for household purposes • Block Tariff for heat • Implementation of measures for improved efficiency (substation and individual metering and controlling devices) • To keep the bills at the current level

7. Pricing policy • Prices are controlled by the State Energy and Water Regulation Commission. • They are proposed by the Energy Production and Distribution Facilities and, after revision and correction of the expenses, and following the procedure of public discussions, a decision for their approval is taken.

8. District heating • District heating is the most cost effective and environmentally friendly option for densely populated areas • It should be provide by flexible and cost effective systems whose development and introduction is a strategic objective • Competitiveness

9. Alternatives • The local fired heating plants and the direct burning of natural gas is a serious alternative to district heating • The new gas networks is not competitive if compared with the already constructed district heating network

10. Alternatives • Investments in construction of distribution networks for low pressure gas and the costs of their maintenance make the cost per heat unit significantly higher than are the costs of the existing district heating network are modernized

11. Alternatives • Electricity was an acceptable alternative for the consumers disconnected from the district heating system. • Due to the price, today the electricity is not acceptable alternative, especially for multi-family houses.

12. The preparation of financial recovering plans for the selected companies has shown, that reducing the heat consumption of the final consumer is a matter of survival for the district heating companies. • This was one important step to make the cost of heating affordable and competitive. • Basically, this can be supported by installing efficient heat regulators (such as thermostatic valves) and cost allocation.

13. Economic analysis of district heating rehabilitation • DH Companies had to perform cost-benefit analyses of investment programs to support the financial recovery of DH systems and to demonstrate an efficient district heating system • Two cities, Sofia and Pernik are under implementation the investment programs with loans by the EBRD and the World Bank.

14. Network rehabilitation in Sofia-36 km of pipes, valves and compensators, variable flow pumps • Sub-station - about 8 000 -installation of regulators and equipment • This was one important step to make the cost of heating affordable and competitive.

15. EU Directives • Promotion of Combined heat and power production - high efficiency cogeneration • new initiatives - a directive on heat from renewable source and energy services • EU requirements on technical institutions