The Socio-Political Capture of Utilities: The expense of low energy prices in Bulgaria and Hungary

Here is a draft chapter for a book that Atanas Georgiev at Sofia University and I have written on the politics and financing of the energy systems in Hungary and Bulgaria.

We hope you find it interesting. Comments are welcomed.

The Socio-Political Capture of Utilities: The expense of low energy prices in Bulgaria and Hungary, LaBelle and Georgiev

Abstract:

Modernization of the energy sector is based on continual investment. Integration of new low carbon technologies rests on investments cycles which continually upgrade the energy system. This article explores efforts to keep utility prices low in Bulgaria and Hungary. This article shows despite European Union efforts to roll-out independent regulatory institutions in these countries’ the state maintains its traditional political role of delivering low cost electricity and gas, at the expense of system investments. The establishment of a technocratic regulatory structure, facilitating regulatory capitalism, was only temporary during and shortly after privatization. Technocratic norms are not embedded. Public riots in Bulgaria and rate cuts of 25% in Hungary indicate the death of technocratic procedures. Energy justice emerges as a rallying cry to tackle energy poverty – even if this prevents the long-term sustainability and development of the system. Energy regulators show symptoms of socio-political capture, not regulatory capture by the private sector. Political leadership in both countries seize price setting authority to deliver social benefits. Neoliberal policies characterized by independent regulation falter under political control intent on low energy prices and extracting additional rents for state budgets.

(Source: European Commission, 'Energy Prices and Costs in Europe', 2014)
(Source: European Commission, ‘Energy Prices and Costs in Europe’, 2014)