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ECONOMY MINISTRY SAYS IT WILL TAKE UNTIL MID-MONTH TO STUDY ENERGY SITUATION

Ministry deadline passes as energy price showdown looms

DESPITE threats from Economy Minister Ľubomír Jahnátek to cap and even reduce energy prices in Slovakia, the independent state regulator that sets the prices seems ready to authorize rises in heating and natural gas rates.
About 50 gas-powered heating plants have asked the Bureau for the Regulation of Network Industries (ÚRSO) to approve new rises as of October 1. The bureau has said it expects prices to increase by five percent to Sk650 per gigajoule, compared to Sk420 in 2001 and Sk140 in 1997.

DESPITE threats from Economy Minister Ľubomír Jahnátek to cap and even reduce energy prices in Slovakia, the independent state regulator that sets the prices seems ready to authorize rises in heating and natural gas rates.

About 50 gas-powered heating plants have asked the Bureau for the Regulation of Network Industries (ÚRSO) to approve new rises as of October 1. The bureau has said it expects prices to increase by five percent to Sk650 per gigajoule, compared to Sk420 in 2001 and Sk140 in 1997.

The bureau was also to decide by September 12 whether to permit a requested rise of 15 percent in the price of natural gas. According to the Sme daily, the bureau was likely to agree to a rise, but by a smaller amount.

The Economy Ministry, which regards energy prices as too high and has demanded they be reduced by five percent, did not react to the information on the planned price hikes.

"We are analyzing the situation on the energy market, the related legislation and energy prices, and we will react only when it is complete," said ministry spokesman Branislav Zvara.

The ministry had asked in early August that energy sector firms work with government representatives in small taskforce groups to come up with ways to satisfy the cabinet's demand for lower prices.

However, by the August 31 deadline for a proposed solution, the firms had suggested only setting up a special fund to compensate lower-income groups who have been hardest hit by the general rise in energy prices. The fund would be supported by financial contributions from energy firms.

Rather than direct payouts to customers, firms such as the SPP gas monopoly and the three electricity distributors suggested using the money to insulate housing to make it more energy efficient.

The distributors also agreed to limit next year's demanded price rise to the core inflation rate, or 1.7 percent, but cautioned that this concession not be regarded as an admission that energy prices had been set too high in the past.

However, Jahnátek dismissed the idea of the special fund as "irregular", and insisted that room remained for a general cut in household prices for gas by five percent and for electricity by six percent. The ministry did not say how it arrived at the proposed figures.

Jahnátek has said in the past that the government would resort to "a tougher solution" if energy firms did not give in to its demands, and that it had various tools to achieve its goals in the energy sector, such as hitting energy firms with higher taxes, changing the Act on Regulation or the Act on Pricing, or even reviewing the privatization contracts by which foreign investors gained stakes in Slovak energy firms over the past five years.

"These privatization contracts all say in their preambles that the privatization is occurring in order to ensure a reduction in energy prices on the Slovak market. The opposite has happened," he said for the SITA news agency.

Household natural gas prices, for example, have shot up from Sk2.8 per cubic metre in 1999 to Sk9.3 in 2004 and Sk13.4 today; SPP's latest proposal would bump them up to Sk15.4 per cubic metre.

The utility last raised prices in January, by five percent, following a 20 percent hike in October 2005.

According to SPP spokesperson Dana Kršáková, the bureau approved the earlier rises on the assumption that the average price of oil, which affects the price of gas, would range from $53-$54 per barrel in 2006. In fact, oil prices climbed over $70 dollars during the year, forcing the utility to sell to households below cost, Kršáková said.

The new government of Prime Minister Robert Fico campaigned ahead of June elections on a promise to bring down energy prices in the country, with Fico claiming that "everything the previous government did in the energy sector in Slovakia was energy treason."

Under the previous two Dzurinda governments, stakes in almost all energy companies, including the SE electricity producer, the electricity distributors, and the SPP gas utility, were privatized to foreign companies. The Fico government has accused these companies of being solely interested in profit.

Fico said after a recent cabinet meeting that while he respected the right of the energy firms to make a profit, "we refuse to respect rapaciousness".

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