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Government price pressure pits electricity companies against each other

A DEMAND by the government that electricity prices be reduced by 5 percent has drawn a response from the dominant electricity producer, Slovenské elektrárne (SE), that the country’s foreign-owned distributors are largely responsible for the high rates.

“The energy profits being racked up by distribution companies are unjustified,” said Marc Arcelli, general director of SE, citing his firm’s profit of Sk1.7 billion in 2005 against Sk6.5 billion combined for the three distributors, SSE, VSE, and ZSE.

The production and distribution of electricity in Slovakia is separated, with SE selling energy at wholesale prices to the distributors, and they in turn selling it on to households and firms for a fee.

According to the industry regulator, the Bureau for the Regulation of Network Industries (ÚRSO), only 40 percent of the final price of electricity goes towards its production, while 44 percent goes on distribution.

Ján Orlovský, spokesman for west Slovakia distributor ZSE, said he didn’t understand why SE was concerning itself with the composition of energy prices. “It’s up to the regulator to judge whether distribution tariffs are justified,” he said.

The government has given Slovak energy companies until August 31 to negotiate in expert working groups to come up with proposals on how to reduce energy prices in the country, a key promise of the ruling coalition Smer party before June elections.

Economy Minister Ľubomír Jahnátek offered recently to buy the majority stake in SE back from the Italian Enel, which finalized the privatization of the utility in April under the previous right-wing Dzurinda government, but Enel again said yesterday it was not interested in selling, and that it planned to invest about Sk72 billion in increasing production capacities.

Despite the pressure on the energy companies to cut prices, Arcelli said he did not believe that the policies of the current socialist government were a threat to Enel.

“Slovakia is a part of the European Union, so I don’t fear any radical changes that might endanger the business climate,” he said in an interview with the Sme daily.

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