Czech district heating companies: Regulated price increases likely to halt cuts in gas-fired heat prices

Regulated prices for gas transmission and distribution are set to rise under a proposal for next year from the Energy Regulatory Office (ERÚ), likely halting any potential cuts in the price of heat generated from gas. The Czech Heating Association said so in a press release reported by the Czech News Agency (ČTK). On Tuesday, ERÚ published its proposal for the regulated component of energy prices for next year. For households, the regulator is proposing a year-on-year increase of 71 percent in the regulated component of electricity prices and around 39 percent for gas, with an even steeper increase expected for large consumers. Business organisations have criticised the proposal. However, Prime Minister Petr Fiala (ODS) said that final energy prices next year would rise by no more than a few percent compared with this year.

In its press release, the association said that under ERÚ’s proposal, the price of reserved exit capacity in the transmission system would more than double, while the increase in gas distribution costs for district heating companies would exceed 40 percent. According to the association, district heating companies will also be affected by the increase in the regulated component of electricity prices, since pumps in district heating systems are generally powered by electricity supplied through the distribution system. The companies also criticised the regulator for setting support for electricity from high-efficiency combined heat and power generation at zero next year, without taking into account the increase in gas distribution costs. According to the district heating companies, all of this will affect heat prices.

„Until recently, we thought that prices for heat generated from gas could fall next year. Following ERÚ’s draft price decisions, the scope for that has shrunk dramatically,“ said Mirek Topolánek, chairman of the executive board of the Czech Heating Association. „We consider it scandalously arrogant that reserved gas transmission capacity is becoming more than twice as expensive and gas distribution costs for large industrial consumers, including district heating companies, are rising by more than 40 percent, while the Energy Regulatory Office does not even feel the need to explain how it arrived at these increases or what factors are reflected in them. I urge ERÚ to provide an immediate, detailed breakdown of the increase in regulated gas transmission and distribution prices,“ Topolánek added.

The association also noted that gas transmission for domestic customers alone is set to become more than twice as expensive. The district heating companies say this gives rise to reasonable suspicion that ERÚ sought to accommodate NET4GAS, which, according to the association, has attempted to pass on the stranded costs of its gas infrastructure assets to domestic consumers. The association says those assets are in fact not needed at all to transport gas to these customers.

„Under the draft price decision, gas transit from Brandov to Lanžhot is set to cost less than transporting gas to a customer in the Czech Republic. We are certainly not prepared to accept that. In good times, NET4GAS did not share its profits from international gas transmission with customers in the Czech Republic, so we see no reason why Czech customers should now have to bail out the company’s finances just because the state wants to buy it,“ said Martin Hájek, director of the Czech Heating Association. ČTK is trying to obtain a comment from NET4GAS.

Prices for heat generated from coal are also likely to rise this year. However, the final price should be lower than that of heat generated from gas.

Under ERÚ’s proposal, households will pay thousands of crowns more per year for the regulated component of energy prices next year. The regulated component of electricity prices for households is set to rise by 71 percent compared with this year, according to the proposal from the Energy Regulatory Office (ERÚ), an increase of around CZK 1,408 per megawatt-hour (MWh) including VAT on average. The regulated component of electricity prices for large consumers will rise even more sharply. Analysts say this will make electricity more expensive than this year. Prime Minister Fiala (ODS) said the increase in final prices would be no more than a few percent, while also acknowledging that the proposal could still be revised. The increase in the regulated component of gas prices will be more moderate, and prices are instead expected to be slightly lower than this year.

At the end of September this year, the government tasked state-owned ČEPS with buying NET4GAS Holdings, which operates a system of gas pipelines and transfer stations in the Czech Republic. According to Industry Minister Jozef Síkela (STAN), the company plays an irreplaceable role in transporting and supplying gas to Czech customers. The state will pay a maximum of five billion crowns for the debt-laden company, although the final sum will depend on its financial performance and whether it meets the agreed economic criteria.