Polish government acts to stabilise power prices

10 January 2019, Week 01, Issue 942

Poland’s government has drawn up plans to protect household consumers from rising electricity prices. But its approach to the issue has put Warsaw at odds with the European Commission, as well as the national energy market regulatory agency.

Prime Minister Mateusz Morawiecki unveiled the new policy in Warsaw in late December, telling reporters that his government had drafted a package of legislation that provided for reducing the excise tax on electricity consumption by 75%, from 20 zloty (US$5.35) per MWh to 5 zloty (US$1.35) per MWh. The draft laws also provide for Warsaw to compensate utilities for lost revenues and to sell around 4.5 billion zloty (US$1.2 billion) worth of additional CO2 emissions credits, he said.

If these measures gain approval – and if state-run power providers such as Enea, Energa, Polska Grupa Energetyczna (PGE) and Tauron support the government’s agenda by reducing their costs – then electricity rates will stop moving upwards, Morawiecki said on December 21. Collectively, these policies could stabilise power prices at the level reported in the first half of 2018, he declared.

The prime minister’s words were apparently convincing – especially after the ruling Law and Justice (PiS) party offered utilities as much as 4 billion zloty (US$1.07 billion) in compensation for lost revenues. The draft law won approval from the Sejm, the lower house of the Polish parliament, on December 28. It then took effect on January 1.

 

Energy Ministry vs. URE

The government decision to freeze prices was in line with previous statements from Poland’s Energy Ministry, which has said that it does not want household electricity prices to climb. The ministry made these remarks in response to state-owned power companies’ request for permission to hike household rates by more than 30% in 2019.

Urzad Regulacji Energetyki (URE), the national energy market regulator, has clashed with the Energy Ministry and PiS on this front. Representatives of the agency said several times last year that household power bills ought to reflect the course of the market.

URE has also been critical of the government’s new plan to stabilise prices. It recently hinted that Morawiecki’s ruling faction had exceeded the bounds of its authority by not adhering to established procedure, which calls for URE to set power tariffs for the year ahead after reviewing requests from suppliers.

In a statement dated January 2, it said: “The regulator accepts with great concern the narrowing of [its] competences when it comes to deciding the prices and tariffs of households.” It also said it expected power companies to send in supplementary tariff requests taking the new policies into account.

 

Brussels chimes in

The European Union’s executive arm has also been critical of the Polish government’s new policy. On January 3, Mina Andreeva, a spokeswoman for the EC, told reporters in Brussels that Warsaw had not fulfilled procedural requirements.

“A member state is obliged to notify [the EC of] any state aid measures before they are put into effect,” she explained. “EU law states that such measures need to be [made public] for the Commission to be able to look at them. So far, we have not been notified by the Polish authorities, but we would expect them to do so.”

Morawiecki’s government sees price stabilisation as an urgent priority ahead of Poland’s next round of parliamentary elections, which are due to take place before the end of November this year. Electricity rate hikes might alienate voters and prevent PiS from preserving its leading role.

Household power tariffs are a concern for Polish consumers. The government has not deregulated the residential power sector, and household tariffs remain below market levels.

By contrast, Warsaw has liberalised the market for business and industrial buyers. These consumers saw their rates climb by 60-70% over the last year, owing to the rise in prices for coal supplies and CO2 emissions permits.

Joseph Murphy

Edited by

Joseph Murphy

Editor

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