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Poland drops plan to fully free up power prices

  Poland’s energy regulator dropped plans to free retail prices on the local electricity market starting next year because the market was not yet fully transparent and liquid, it said on Monday.

 

“More than 90% of electricity is being traded in bilateral contracts and long-term contracts between companies which are not public and as such untransparent,” said Rafal Gawin, head of the watchdog’s department for promoting competition. “Trading on the energy exchange is marginal.” Polish regulators, under pressure from the European Commission, had previously indicated they would fully deregulate prices starting in 2009.

Power producers and distributors, including Polish units of Vattenfall and RWE have argued that artificially set prices do not reflect their costs and prevent them from improving and expanding outdated facilities. The energy watchdog had approved two price hikes in 2008, which helped fuel inflation to seven-year highs earlier this year.

Some analysts predict that power prices in Poland could rise by more than a fifth if allowed to be fully set by the producers, which could have political repercussions for the centre-right government. A decision to continue controlling power prices could affect Poland’s plans to float state-owned power groups, already threatened by the weak equity markets. (Reuters)