Heat in Czech Plzeň to rise by a quarter; councillors reject 40% increase

Plzeň councillors today approved a 28.3 percent increase in heat prices from January next year. In mid-October, the board of Plzeňská teplárenská proposed a 40 percent price increase, which the city leadership rejected. The average household will therefore pay 268 crowns more per month than it does now. Thirty of the 42 councillors present voted for the increase, while the opposition ODS and TOP 09 abstained, the Czech News Agency (ČTK) reported. The district heating company, the largest heat supplier in western Bohemia, is majority-owned by the City of Plzeň, with 35 percent held by Daniel Křetínský’s EPH Daniel Křetínský; its representatives approved the increase on Wednesday evening. The company’s general meeting will have the final say on 28 November.

According to the company’s CEO, Václav Pašek, people in Plzeň will continue to pay the lowest heat price in the country. The current Czech average is below CZK 1,200/GJ, according to the Association for District Heating of the Czech Republic. This year, people in Plzeň pay CZK 626.67/GJ including VAT, or CZK 569.34/GJ excluding VAT.

„The board originally proposed raising the price of heat for residents in 2024 by CZK 240 per gigajoule excluding VAT. The new agreement with the other shareholder provides for an increase of CZK 161.30/GJ,“ said city councillor Vlastimil Gola (ANO).

According to Mayor Roman Zarzycký (ANO), the increase was cut by roughly a third compared with the original proposal. „The negotiations were very tough, but constructive. Our aim is for Plzeň to continue to have the lowest heat price in the country,“ he said.

Pašek said there are four main reasons for the price increase. „The heat commodity is making a deep loss, all state support for district heating has also been abolished, which will cost us CZK 200 million. In addition, we must continue the decarbonisation process (the company’s transition away from coal by 2030), which requires total investment of around CZK 7 billion,“ he said. According to Pašek, the company cannot keep heat prices loss-making, or effectively below cost, in the long term. It could face fines from the Czech Office for the Protection of Competition for giving district heating customers an advantage over users of other heating methods. „Moreover, a commercial company cannot keep this commodity loss-making in the long term while acting with due care,“ he added.

According to Zarzycký, the city is not raising prices by more than necessary, and the increase has ultimately been set at a level that will leave the company at so-called operating break-even. Pašek added that keeping prices unchanged would result in a CZK 443 million loss for the company from heat sales next year. „We already expect a loss of CZK 479 million on heat this year,“ he said. The price increase approved today will not generate a profit for the company, but nor will it result in a loss.

The opposition did not dispute the need for a price increase. However, it questioned why, over the previous four years since EPH joined Plzeňská teplárenská, prices had risen only minimally and largely as a formality, particularly because the company had been supported by highly profitable heat sales. The city and company leadership argued that this was not permitted under the rules of the Energy Regulatory Office. „We were not given an explanation as to why revenue from one commodity (electricity) cannot be used to cover losses from another (heat),“ said councillor David Šlouf (ODS). Pašek said that favourable electricity prices cannot compensate for low heat prices, but that electricity helps the company as a whole maintain a healthy profit. Former mayor Pavel Šindelář (ODS), a member of the company’s supervisory board, said he understood the price increase but could not vote for it because the city leadership had not committed to foregoing dividends from the profits that the city has received from Plzeňská teplárenská for several years. The mayor added that this would be discussed in future negotiations.

Plzeňská teplárenská supplies 54,000 households, equivalent to roughly 145,000 of Plzeň’s 180,000 residents. The company raised heat prices by an average of 4.8 percent to CZK 626.67/GJ including VAT this January; in January 2022, it increased heat prices by 9.7 percent.