Hungarian gov't to end compensation for regulated gas prices

Energy Trade

Hungary's government will no longer guarantee gas companies compensation in the form of centrally-regulated price increases for losses resulting from a negative gap between the import price and their selling price.

After 2003 the government agreed to raise gas prices for households and companies by a degree that would offset losses gas companies suffered because the price of imported gas exceeded their own wholesale prices.

An amended statute published in the latest issue of the official gazette Magyar Közlöny reveals the government would raise retail and company gas prices, by 6.55% and 9.4%, respectively, from October 1. The price increases were announced on Saturday and the statute was published on Sunday. Hungary's Economy Ministry reviews centrally-regulated gas prices on a quarterly basis.

István Kutas, a spokesman for E.ON Földgáz Trade, told MTI the company would like to sit down with government officials as soon as possible to hear about the change in the price formula which was new to the company.

Kutas said that E.ON was “surprised” by the scale of the price rises announced on Saturday, he said, adding that the government had promised them to keep the regulation unchanged to ensure that all such losses would be cleared by the full opening of the gas market due in the middle of 2009.

Government spokesman Dávid Daróczi said on Saturday that the government was asking for an examination to determine whether or not gas companies' reported costs on the regulated market are all justified. He said that according to experts E.ON had been compensated for losses made in 2005 and 2006 resulting from the negative import and wholesale price gap by the end of 2007.

Kutas acknowledged that Ft 100 billion of such losses E.ON Földgáz Trade took over when it bought Hungarian oil and gas company MOL's gas business in 2006 had been compensated. E.ON Földgáz Trade has booked, however, another loss of Ft 30 billion on regulated-market gas sales in 2007 and 2008 because regulated prices have not raised fast enough, Kutas said. (MTI – Econews)

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