Czech District Heating Association: Tax changes will raise heat prices next year

Heat prices will rise next year. The reason is this year's change in the interpretation of the tax exemption for fuels used in combined heat and power generation, which the state now allows to be applied only to the share of heat supplied to households. According to district heating operators, hospitals and schools may therefore have to pay tens to hundreds of thousands of crowns more for heat each year. The Czech District Heating Association told ČTK today. ČTK is seeking a response from the Finance Ministry.

Until now, the rules provided that if heat from combined heat and power generation was supplied to at least two households, all fuel used for that generation was tax-exempt. However, the association pointed out that since March this year, the General Directorate of Customs has allowed the tax exemption for gas and solid fuels used in combined heat and power generation to apply only to the fuel corresponding to heat supplied to households.

According to the association, this has created several practical problems and legal uncertainty. Heat producers using cogeneration often sell heat through a chain of downstream heat distributors and therefore do not have direct information about the final consumers of the heat. In apartment buildings, part of the heat may be supplied to premises used for commercial activities, such as ground-floor shops, meaning it is often impossible to clearly distinguish heat supplied to households. According to district heating operators, the new interpretation also results in tax being imposed on gas and solid fuels used for cogeneration that were previously fully tax-exempt.

"So far, district heating operators have absorbed this surprising change in tax liability and have not passed it on to heat prices, but this cannot continue indefinitely. Since spring, we have repeatedly tried to discuss specific legislative solutions with the Finance Ministry, but so far without result. It is therefore fair to inform customers that this additional taxation will be reflected in heat prices next year, beyond other factors affecting those prices. The draft amendments to the price decision on thermal energy prices also take this into account," said Mirek Topolánek, chairman of the executive board of the Czech District Heating Association.

For non-household customers, the price of heat will rise by around 15 to 20 Kč per gigajoule (GJ) of heat consumed, according to the association. Based on the association's models, schools may, for example, have to pay tens of thousands of crowns more per year, while district hospitals could face additional costs of hundreds of thousands. Households will also pay more, as the tax will apply to fuel used to cover heat losses in the distribution network even when heat is supplied to households, as well as in cases where it is not possible to distinguish between heat supplies to households and other customers.