THE EUROPEAN Union has joined Slovak companies in their criticism of Slovakia’s high electricity prices. In response, the Regulatory Office for Network Industries (ÚRSO) wants to use its powers, strengthened by the so-called third energy package, to reduce tariffs related to the distribution of electricity, which will have an impact on the final price of electricity. Prime Minister Robert Fico welcomes this step, saying that it will make Slovak companies more competitive. ÚRSO head Jozef Holjenčík announced his plan on July 1.
“Energy prices will fall considerably,” said Holjenčík as cited by the TASR newswire. “This will have a significant impact chiefly on the industrial sector. We expect that the drop will be a two-digit figure. Of course, this will also influence households”.
However, Holjenčík did not specify how the authority aims to achieve such a reduction in electricity prices, which should fall in the beginning of 2014.
“I would not want to make premature announcements, but I can specify two basic steps,” said Holjenčík as cited by the SITA newswire. “We want to introduce a new charge for reserved capacity for electricity producers, who are connected to the grid and deliver electricity. The second factor that will certainly have an impact on the steep reduction of electricity prices is the cost optimisation of regulated entities. All this will lead to a reduction in distribution fees.”
The final electricity price, either for companies or households, consists of the price of the electricity as a commodity and various charges related to its distribution, transition and other factors. Charges may create a significant portion of the final price, and their portion depends on the category of the client and amount of electricity it consumes. The price of electricity as a commodity depends on its price at the power exchange, i.e. demand and supply. In the case of companies the charges may make up more than half of the final price and, thus, reduction of these charges will significantly reduce the final electricity price.
ÚRSO’s activities will have impacts on prices for business clients as well as households. For households the reduction will be lower because of the lower portion of distribution and other charges.
Fico believes the reduction of electricity prices will increase the competitiveness of companies in Slovakia.
“If we are to aid economic growth by means of our own resources, one of the best ways would be to boost competitiveness via lower energy prices for the entrepreneurial sector,” said Fico as cited by TASR.
Companies in general welcome the planned reduction of electricity prices, but they will offer their final opinion of the changes only after the details are disclosed, the Sme daily wrote.
Tibor Gregor from the Klub 500, an organisation of producers with 500 and more employees, pointed to high energy prices in Slovakia. While a large company pays over €100 per 1MWh in Slovakia, in Germany it is €67, Sme wrote.
Holjenčík explained that prices are lower in Germany because its government compensates companies with subsidies for some charges. Thus, as Holjenčík said during a discussion programme of the TA3 news channel, Eurostat is comparing apples and oranges, as Slovakia is giving unsubsidised prices to Eurostat.
Gregor thinks ÚRSO’s solution may not be ideal and would prefer the state to subsidise companies for some charges.
The proposed new charge for reserved capacity will not please electricity producers, of which Slovenské Elektrárne is the largest. It may pay €70 million on this new charge annually, according to Sme.
Energy analyst Michal Hudec perceives the proposed charge as a good tool even though it is possible to question the amount.
“It introduces the principle that everybody using services of the grid pays for access to the grid,” Hudec told Sme, adding that so far power producers, contrary to electricity distributors and energy consumers, have not paid such a charge.
Slovakia adopted the third energy package prescribed by the European Union last year when the Slovak parliament passed new energy legislation including the law on regulation, which gives ÚRSO the power to cap costs of electricity distribution companies. So far the distributors have calculated their costs themselves and ÚRSO has had to accept them, the Hospodárske Noviny daily wrote. The new legislation gives ÚRSO the power to decide which costs are justified and which are not.
