"Who's the winner?"
By Ivan Štulajter

News item: Energy market regulator publishes list of approved prices for 2007, showing the Fico government's pressure for price cuts was mostly successful.

From the prices that have been approved for gas, electricity and heating, and those that await approval for water and sewage, we can conclude that households will not be paying much more for energy next year. In some cases, when the real growth in wages is taken into account, we can even say they will fall.

This could also be good news for inflation and Slovakia's plans to adopt the euro in 2009, as long as large energy consumers do not see a large price increase, given that their prices are not regulated. This will help to quell the surge in prices due to strong domestic demand, and the expansion of the economy towards its potential, as is happening in construction.

The end of the regulation process opens the question of to what extent prices are a result of objective factors (oil and currency developments), improvements in the supervision of the regulatory bureau, or often brutal pressure by the government. Obviously, every side will interpret the results in the way that best suits it.

The regulatory bureau will not admit that it soiled itself under the threat that its members would be fired. The regulated companies will want to avoid a political fight and will interpret the final prices, which shave their profits, as the result of positive external factors, including the compromise with the SE electricity utility on electricity purchases.

Even though the development of energy prices is not quite what the government wanted, it is substantially different from what the firms originally proposed. Prime Minister Fico and Economy Minister Jahnátek may even have had a role to play in this. If so, the draft Act on Regulation, which brings regulation dangerously close to politics, is unnecessary. An agreement can clearly be reached without it.

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