Czech energy price caps to cost around CZK 50 billion this year, half original estimates

The cost of capping energy prices this year is expected to reach around CZK 50 billion, according to current estimates. That is roughly half the amount the government originally projected when it introduced the price caps. David Hluštík from the press department of the Ministry of Industry and Trade (MPO) told the Czech News Agency (ČTK). The decline in energy prices on the market has helped bring costs down in particular. The price caps are in force for the whole of this year. The government has not yet made a final decision on whether they will remain in effect next year, but they are expected to be scrapped.

The government introduced price caps on electricity and gas for this year in response to the sharp rise in commodity prices on the market during last year’s energy crisis. The caps were set at 6000 crowns per megawatt-hour (MWh) of electricity, including VAT, and 3000 crowns per MWh of gas. Distribution charges must be added to these amounts. The caps have applied to households, businesses and public institutions since the beginning of the year and will remain in place until the end of this year.

„According to the current estimate, the total cost of capping the commodity component of energy prices in 2023 will be around CZK 50 billion,“ Hluštík said.

The state budget for this year originally put the cost of the price caps at CZK 100 billion. Some of the other scenarios considered by the government projected significantly higher costs. However, costs fell during the year as energy prices on the market declined.

At the beginning of the year, almost all domestic suppliers were using the government’s energy price caps in their price lists. They said that without the caps, electricity and gas prices would have been significantly higher. The government therefore approved a compensation mechanism for energy traders at the beginning of the year to cover the costs incurred by energy suppliers when applying the price caps and prevent any potential abuse of the scheme. During the year, however, suppliers began offering customers contracts below the price cap in response to falling wholesale energy prices. This also reduced the amount of compensation claimed from the state.