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IEA commends energy security measures but tells Hungary to reduce market regulation

The International Energy Agency (IEA) welcomed Hungarian measures to boost energy security and reduce emissions, but recommended a gradual return to full liberalization on the retail energy market in an assessment of the countryʼs energy policies released yesterday, Hungarian news agency MTI reported.

“We applaud Hungary’s achievements in reducing the carbon intensity of its economy, building energy infrastructure and strengthening energy security, most notably via gas storage,” IEA Executive Director Fatih Birol said in a statement released by the agency.

“Hungary has made progress in diversifying its energy supplies and increasing competition in the energy sector, but there is still more to do on both fronts,” he added.

The IEA noted in the assessment that Hungaryʼs government had mandated utilities price cuts for households starting in 2012 and had later established a state-owned energy retailer that acquired a number of its foreign-owned peers. Although acknowledging that the price cuts had “boosted the purchasing power of households”, it warned that the consolidation in market power “is likely to have repercussions on the investment climate in the energy sector and on competition in the retail sector”.

It recommended that the government “develop a clear and transparent program for the implementation of full retail market liberalization, including the elimination of administratively determined end-user prices”.

The IEA also recommended improved implementation of Hungaryʼs National Energy Strategy to 2030, more ambitious energy efficiency targets and compliance with EU principles, rules and regulations with regard to the upgrade of the Paks nuclear power plant.

Speaking at a press conference after the presentation of the IEA assessment in Budapest on Thursday, state secretary for energy affairs Andras Aradszki said boosting competition is important for the government of Hungary, too.

“The Hungarian gas and electricity market is open, and free market rules are in force,” he said.

The government is seeking a “mutual solution” on the matter of retail clients who use regulated utilities, one that allows consumers to “continue to have secure access to gas and electricity at an affordable price”, he added.