The EC proposes to set a wholesale price ceiling for natural gas :: Dienas Bizness

The Ministry of Economy (ME) will encourage companies to compensate 50% of the price of electricity above 160 euros per megawatt hour (MWh), inform the representatives of the ME.

Taking into account the rapid increase in the price of energy resources, which creates a risk for the population’s ability to pay heating bills, as well as endangers the existence of exporting companies essential to the Latvian economy, the Ministry of Energy has prepared additional measures to reduce the price of energy resources for this heating season.

Among them, the EM offers support measures to all companies, regardless of their size and type of operation, providing for an electricity price threshold of 160 euros per MWh. In this case, the state would compensate 50% of the price that exceeds the set threshold. The support is planned to be applied from October 1, 2022.

In order to provide additional support to households, the Ministry of Finance offers to differentiate the support for centralized heating. The tariff for centralized heat supply in a number of municipalities will exceed 150 euros per MWh, so the Ministry of Energy offers to maintain the already approved support up to 150 euros per MWh, where the state will compensate 50% of the price that exceeds 68 euros per MWh. On the other hand, it is proposed to compensate 90% of the part that exceeds 150 euros per MWh.

The second support measure for households directed by the Ministry of Finance will be the determination of a single threshold for the price of natural gas. Currently, the regulated natural gas tariff is 107.34 euros per MWh, but the market price exceeds this threshold. The EM proposal envisages setting a natural gas price ceiling of 107.34 euros per MWh, and the state would compensate traders for the amount that exceeds this threshold.

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The third support measure directed by the EM will be compensating the increase in electricity prices for households. On average, a household in Latvia consumes 150 kilowatt-hours (kWh) per month, but most households spend around 100 kWh. Therefore, the EM will encourage all households to set the first 100 kWh at a fixed tariff, which does not exceed 180 euros per MWh, and the state will compensate the remaining difference with the real price.

The Minister of Economy will submit these proposals for consideration at the meeting of the Cabinet of Ministers on Tuesday, September 27.

Minister of Economy Ilze Indriksone (NA) on Monday at the extraordinary meeting of the National Economic Council with entrepreneurs and representatives of organizations representing the largest entrepreneurs, as well as additionally invited representatives from universities and institutes, ice rinks, as well as the Association of Latvian Major Hospitals, the Latvian Swimming Federation, the Association of Latvian Heating Enterprises, Foreign investor councils and others, discussed the additional measures prepared by the Ministry of Energy to mitigate the impact of energy resource price increases.

Representatives of business organizations emphasized that state support will be crucially important this fall and winter, allowing entrepreneurs to think about business and ensuring the competitiveness of wages. At the same time, the representatives of the Association of Heating Companies emphasized the need for additional support measures for households in those municipalities where the currently approved heat energy tariffs significantly exceed the average level in the country.

The president of the Confederation of Latvian Employers (LDDK) Andris Bite states that the LDDK fully supports the proposal of the Ministry of Energy to determine the maximum level of the electricity threshold and the compensation mechanism to support the increase in the price of energy resources. “This will not only allow entrepreneurs to “overwinter more easily”, but will also contribute to the saving of energy resources,” he mentions.

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On the other hand, the president of the Latvian Chamber of Commerce and Industry (LTRK) Aigars Rostovskis notes that horizontal support for all entrepreneurs is also important in addition to households and energy-intensive companies.

The government has already approved support mechanisms for residents to reduce the extraordinary increase in energy prices this heating season, including the decision to cancel the mandatory electricity purchase component (OMI), from October 1 to April 30, 2023, legal entities will be fully compensated for the electricity system service fee or the system operator distribution and transmission tariff costs, including value added tax, except for state and local government institutions and those legal entities to which the household tariff is applied.

Also, a support program for energy-intensive processing industry merchants has been approved for entrepreneurs, compensating the increase in the prices of energy resources in the form of a grant for the period from February 1, 2022 to December 31, 2022. The amount of support is intended to be up to 30% of the attributable costs of natural gas or electricity, not exceeding two million euros in total for one merchant.

The National Economic Council is a consultative body established by the Ministry of Economy, LTRK, the Union of Local Governments of Latvia, the Union of Free Trade Unions of Latvia, LDDK, which attracts industry associations and independent experts in its work in order to promote professional solutions related to business policy. The purpose of its activity is to promote the creation and implementation of an environmental policy favorable to business in Latvia, as well as to promote the implementation of the principles of sustainable economic development in the country and to promote its processes and public participation in it.

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