Czech Energy Regulatory Office: Regulated prices to rise roughly in line with inflation over next five years

Regulated energy prices are expected to rise year on year by an average of roughly the rate of inflation over the next five years, and by no more than one to two percent above it. Their exact level will be influenced by developments in energy market prices and consumption. The increases are intended to reflect the need for higher investment in networks. Jan Šefránek, chairman of the Council of the Czech Energy Regulatory Office (ERÚ), told journalists today. The Office today issued a new methodology for setting regulated prices, which will apply from next year through 2030.

Energy prices consist of a commercial component set by suppliers and a regulated component overseen by the state. The regulated component currently accounts for about 40 percent of the final electricity price for households and around 20 percent of the gas price. For large consumers, the regulated component makes up a smaller share of the final electricity price.

„The new regulatory methodology will not lead to a sharp increase in regulated prices, even though the pace of necessary investment is rising significantly. We expect average year-on-year increases in regulated prices to be in line with inflation, and no more than one to two percent above it. The outcome will depend on wholesale energy prices, consumption and other factors,“ Šefránek said.

He noted that state subsidies for network development could further soften the impact on consumers. „Although the ERÚ does not decide whether specific subsidy schemes are launched, the methodology sets clear conditions for how any subsidies can be effectively reflected in the finances of regulated companies, thereby reducing the regulated prices paid by customers,“ Šefránek said.

He said the new methodology responds to the ongoing transformation of the energy sector. The new rules are intended to take particular account of the need for increased investment in strengthening and modernising networks, driven mainly by the connection of new energy sources, the introduction of so-called smart technologies and the automation of some processes. In this context, Šefránek noted that investment in electricity and gas networks has risen by several tens of percent in recent years, and network operators expect it to continue growing in the coming years. Under current plans, investment in electricity networks is expected to total approximately 187 billion crowns between 2026 and 2030, with more than 48 billion crowns going to the gas sector.

According to the Office, the new methodology should also be better suited to, for example, the growing number of customers becoming active self-producers, particularly through community energy sharing.

The rules for the new regulatory period also introduce new forms of incentive regulation based on key performance indicators. These are intended to take account of factors such as ensuring network capacity, modernising networks, network reliability and reducing the cost of covering technical losses in the network.

This year, the regulated component of energy prices for households rose by 1.4 percent for electricity and 8.6 percent for gas. From the start of the year, this amounted to an increase of tens of crowns per megawatt-hour (MWh) consumed. For large consumers, regulated electricity prices fell slightly. Last year, regulated energy prices rose by tens of percent in response to the energy crisis and the sharp increase in market energy prices.