Electricity price for private HPPs reduced

The government approved a formula to encourage private investments in 2007. This formula has calculated to pay the energy purchase from privates with the same price as the energy import of one year ago, plus 10%.

Based on this formula, private producers sell energy to KESH with 9.2 ALL oer KW/H. Due to the construction of dozens of new hydropower plants in the past five years, their production has increased with 12 times.

The law obliges KESH to buy this energy even if they are the producers. Combined with the price, which the government says is very high, this has caused a strong increase of costs for the corporate. This cannot go to the final price of consumers, and this is what deepens the financial crisis of the entire sector.

To correct this, the government proposes a new payment formula, based on the initial annual energy price in the Hungarian stock market, and then converted into ALL with the current exchange rate.

When hydropower plants are connected to the distribution network, they will have a 10% bonus.

The new formula will drop the energy price for privates from 9.2 ALL to 6.4 ALL.

According to these calculations, the total cost that KESH pays for energy in the next year will be reduced with 23 million USD, and their effect will be increased in the years to come. According to the Ministry of Energy, this not only improves the ruined finances of the corporation, but it also goes as a profit to consumers, since it affects the final price that they pay.

The government says that this is the first step for stabilizing the energy sector, which has been in a deep financial crisis for years, with a total debt of 1.1 billion USD. According to the Ministry of Energy, the change of the price has no legal risks, since there will be no unilateral changes of the agreement that the government has with concessionaries.

What remains to be seen is how private investors will see this measure, and what financial effects will it have for them.

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