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Act makes household energy prices centrally regulated

Amendments to the laws on gas and electricity prices passed by Hungarian Parliament on Tuesday will again make the price of energy supplied by the so-called universal service providers to households and small consumers directly centrally regulated. Legislation passed will also allow district heating producers to buy natural gas at the centrally regulated prices for one more year.

Parliament passed the amendments with 303 deputies in favor and 20 Socialist MPs abstaining.

The prices affected will be frozen at their current levels until the relevant minister issues a decree about the new price-setting mechanism according to the passed amendments.

Under the new legislation, the relevant minister will set the maximum prices which can be charged to households and small consumers by suppliers with "universal service provider" status - those which deliver gas and electricity to households, small consumers and public institutions using a price structure and price level controlled by state authorities, thus mitigating exposure to market forces.

At present the minister sets the maximum price margin universal service providers can use.

The proposed amendments do not affect prices on the liberalized markets.

The liberalization of the Hungarian electricity market started at the beginning of 2003 and that of the gas market started at the beginning of 2004. Prices for retail consumers charged by universal service providers were directly centrally regulated until the end of 2007 on the electricity market and until middle of last year on the gas market.

A freeze of retail energy-prices until the government prepares a new price mechanism in consultations with utilities companies is part of the new government's action plan announced by Prime Minister Viktor Orbán just a week earlier.

National Development Minister Tamás Fellegi said last Thursday that the energy distributors had accepted the government's invitation for talks about the pricing review and an agreement on a new pricing mechanism could be reached by the autumn. (MTI-ECONEWS)