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Hungary to fully open up gas market from mid-2008

Hungary expects to genuinely deregulate its gas market from July 1, 2008, six months after the full deregulation of the electricity market, department head at the Ministry of Economics and Transportation Tamás Zarándy told a conference in Budapest on Tuesday.

Zarándy said it made sense to introduce the changes to the gas market model mid-year, rather than in the middle of the heating season. He said under new gas legislation to be prepared Hungary will have a self-regulating gas market, with intervention only possible in the case of disruptions. Hungary has met EU requirements through enacting the deregulation of its electricity and gas markets by July 1, 2007, he said.

A new electricity law will be passed by parliament by July, and it will partially take affect immediately, with the remaining clauses effective by the start of next year, Zarándy said. Department head at Hungary's Competition Office (GVH) Barna Szemán told the conference there was a need for a regional gas market as Hungary's gas market was not big enough to allow real competition after deregulation. Conference participants noted that purchases on the deregulated electricity market has fallen from 40% of all consumption in 2003, when the market was partially deregulated, to 20% now.

Purchases on the deregulated gas market, partially freed from controls on July 1, 2004, account for just 6-10% of total consumption. The partial deregulation allowed large consumers to buy their electricity or gas on the free market. Gábor Molnár, who heads a gas industry association, said gas companies are already preparing pricing systems for households after the market is deregulated.

Zsombor Szilágyi, deputy managing director of The First Hungarian Gas and Energy Trade Company (Emfesz), a trader on Hungary's deregulated gas and electricity markets, noted that 170,000 of Hungary's 3.2 million gas consumers are non-retail consumers, however, 160,000 of them consume on the scale of a household. 100,000 of these small non-retail consumers will be obliged to select a gas service provider through a public procurement process once the market was fully opened up, which would cost them combined up to Ft 8 billion in additional costs, Szilágyi claimed. (Bloomberg)