Economists dissed Fialo’s promises. On the contrary, power electricity prices are expected to rise

The national debt is growing and the Petr Fiala (ODS) cabinet no longer wants to subsidize energy prices in addition to other austerity measures. Because of their capping, the state spent 40 billion crowns last year alone. But now the party is over. Starting next year, not a single crown will be spent on regulation. The Prime Minister calms the situation by saying that the price increase will not be so dramatic, as the important prices of power electricity are being reduced. According to experts, you can’t rely on it in any case, the exact opposite is even possible. And they remind that the fees for renewable energy sources will also return from January. Payments for transmission system services will also increase.

For this year, electricity prices were capped at CZK 5,000 excluding VAT per megawatt-hour (MWh) of power electricity. From next year, it won’t be like that anymore.

“The increase in regulated prices, which in the basic tariff will come out to approximately 1,400 crowns per megawatt hour including VAT, will erase the price drop in the power price of electricity,” said Prime Minister Petr Fiala (ODS) on Tuesday.

​And he claimed that energy prices will not rise by tens of percent. “Because the price of power electricity is going down, people will pay mostly the same as this year or at most one percent more,” added Fiala.

Analysts give him partly the truth. “The prices of electricity and gas on the international wholesale markets are now falling. Even on the German stock exchange in Leipzig, which is important for us,” explains analyst Lukáš Řezníček from the Center for Economic and Market Analysis (CETA).

​Rising fees not only for renewable resources

According to him, producers also produce electricity more cheaply today, but there is one catch. “Czechs pay fees that no other citizens see on their energy bills. From next year, the fees for renewable resources will be refunded at the level of up to ten percent of the bills paid by households. At the same time, the regulatory part, for which the transmission system operator ČEPS is responsible, is increasing,” warns an analyst from CETA.

And he reminds that the state spent about 40 billion crowns on the regulation of electricity prices in 2022. This year, however, this amount will probably be lower, perhaps even halved. “Electricity is already mostly sold at the market price, which has fallen below the ceiling set by the government,” reminds Řezníček.

Power electricity is electrical energy produced in a power plant and distributed to end users at collection points, i.e. what electricity consumption is all about. Power electricity is a product, therefore it is traded on the electricity market. It can be traded on energy exchanges, some distributors have it secured on the basis of long-term contracts.

He promises something that is not in his power

However, experts would not put their hand in the fire for some of the prime minister’s claims. The current and mentioned favorable situation may not last materially. The fact that the prices of power electricity will continue to decrease and thus compensate for the increasing fees or the removal of price ceilings cannot be 100% relied on in the future.

“The prime minister promised something over which he has no influence. It can even be said that it probably won’t be as they claim. Prices will be more or less the same. Anyone familiar with economics knows that it is always better to speculate on growth than on decline,” warns an expert from CETA.

Also according to another expert Jiří Cihlář from Next Finance, the development of power electricity prices is difficult to predict. “The market is still under great tension. Prices react to any problem, including those on the stock market, much more significantly than we were used to before 2020,” warns Cihlář.

​And he reminds that electricity is not only traded on the stock exchange. “Each distributor, such as CEZ, buys energy in a different way. Some have long-term contracts and they do not respond to current developments, including possible discounting. Other companies, on the other hand, bet more on short-term contracts,” reminds an expert from Next Finance. According to him, it is also necessary to differentiate end consumer prices from stock market prices.

“Some of the energy companies are still running out of older contracts, due to which they are still buying electricity at higher prices than the current prices on the stock exchange,” adds Cihlář.

Fiala promises that electricity will only become more expensive. Babiš is said to be responsible for everything (31/10/2023):

TN.cz