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Fico: Gas prices will not go up

HOUSEHOLDS need not worry about rising gas bills next year, as these will remain unchanged. This news did not come from the management of the major natural gas utility or the national regulator, but from Prime Minister Robert Fico, who convened a special press conference to make this announcement.

Fico pledged that gas prices would not rise.(Source: TASR)

HOUSEHOLDS need not worry about rising gas bills next year, as these will remain unchanged. This news did not come from the management of the major natural gas utility or the national regulator, but from Prime Minister Robert Fico, who convened a special press conference to make this announcement.

“I want to announce that the SPP parent company, of which the state is just obtaining 100 percent, instead of proposing a hike of gas prices for households by 26-30 percent for 2014, is taking a path of protection of households,” Fico said on September 30, as cited by the TASR newswire. “The SPP parent company proposes the same price as in 2013.”

The Office for Regulation of Network Industries’ (ÚRSO) will now have the final word over gas prices when it issues a verdict within one month. But as its head Jozef Holjenčík assumed the post during the first Robert Fico government and as the two are regarded as having close ties, no changes are expected even though current household gas prices are generating a loss for SPP.

The natural gas distribution network in Slovakia is dense, with people using gas to heat their homes and water. Thus, keeping gas prices unchanged can be seen as state support for households.

Fico further elaborated on the plans to reduce SPP losses from the sale of natural gas to households under the current conditions. If SPP wanted to recover losses from the sale of gas to households by increasing prices, it would have to raise them by 26-30 percent. The loss on the supply of natural gas for households in 2014 is estimated at €40 million, according to the Pravda daily.

“First off, highly confidential talks with the [Russian] Gazprom are underway regarding better conditions in the long-term gas supply,” said Fico. “Corrections in the contract will enable us to eliminate the mounting losses of Slovakia’s gas utility SPP from the sales of gas supplies to households. Secondly, since we will control the SPP parent company, we will proceed with corrections in the gas storage agreement by next year, as there is room for reducing gas storage costs,” said Fico.

SPP holds a 56.15-percent share in the gas storage company Nafta, and German E.ON Ruhrgas International AG holds 40.45 percent.

“Thirdly, once we take full control of the parent company, we will start restructuring, as we see huge savings in the actual functioning of the company,” said Fico. “The overall plan is to bring the losses to a minimum level, perhaps to zero, in four or five years. This plan, however, may be implemented only if we acquire 100 percent control of the parent company.”

The last time the cap on household gas prices increased was at the beginning of 2013, up 0.46 percent on average. ÚRSO turned down a proposal of SPP from the end of 2012 to increase household gas prices by 25 percent in 2013.

SPP controls over 80 percent of the market of natural gas for households. Even though SPP will not increase gas prices next year, it is losing clients, including state ones, to alternative gas suppliers offering cheaper gas.

The presidential office opted for an alternative supplier, too: Magna EA won an electronic tender at the presidential office when it offered a lower price than SPP, the second and final participant in the tender. Price was the only criterion in the tender, the Sme daily reported.

According to Daniel Lipšic, independent MP and leader of the extra-parliamentary New Majority-Agreement (NOVA), there are several other state institutions buying cheaper gas from alternative suppliers: railway companies Cargo and ŽSR, the Foreign Affairs Ministry, a data centre of the Finance Ministry, and others.

In Slovakia gas prices for households and small and medium-sized consumers are regulated by ÚRSO. Prior to a gas price hike, the utility has to ask ÚRSO whether it can do so. Previous minority owners of a 49 percent stake in SPP with managerial control, E.ON Ruhrgas and GDF Suez, asked several times for a gas price increase, but failed.

Earlier this year, EPH, controlled by Czech entrepreneurs Daniel Křetínský and Petr Kellner and Slovak financial group J&T, bought a 49-percent stake in SPP with managerial control for €2.6 billion from its foreign shareholders E.ON Ruhrgas and GDF Suez. They promised not to increase household gas prices in 2013. The remaining 51 percent is managed by the National Property Fund (FNM). In September the Slovak government agreed with EPH to take control over the remaining 49 percent as well as part of SPPcs debt. EPH will continue to control 49-percent stock in profitable SPP subsidiaries SPP-distribúcia, which manages the country’s gas distribution network, and Eustream, the natural gas transporter and operator of the transmission system in Slovakia.

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