Polish state energy giant PGE has called for an end to controls on electricity prices to help utilities bear the additional costs linked to the European’s Union’s climate targets.
“We at PGE are in favour of deregulating electricity prices for households in our country,” said Wojciech Dąbrowski, CEO of PGE, in an interview with WNP.pl, a business news website. But he added that a system should be put in place to protect customers “at risk of energy poverty”.
Poland still relies on coal for almost 70% of its energy production, by far the highest proportion in the EU. Last year, its electricity prices grew faster than in any other EU country, according to a recent report by the state auditor, which found that the government had broken its promise to protect households from rises.
Under the current system, electricity sellers submit applications to the Energy Regulatory Office (URE), a state agency, with proposals for new tariffs for households, which officials must then approve. Prices for wholesale of electricity are decided through market mechanisms.
As a result, throughout the year there can be a growing gap between the URE-regulated prices for households and those available to business customers.
For example, in July, wholesale prices on the Polish Power Exchange stood at 0.38 zloty (€0.08) per kWh, while those regulated for households (G11 tariff) varied between 0.16 and 0.23, reports Business Insider Polska.
Energy prices have been climbing for all customers in Poland, as the EU’s emissions trading scheme has resulted in the price of carbon dioxide hitting €55 per tonne, up from €27 last year. This has made Poland’s coal-fired energy more expensive.
While electricity prices on average dropped in the EU in the second half of 2020, they rose 14.1% in Poland, more than in any other member state. PGE, the country’s largest electricity generator, says it will be paying 20 billion zloty (€4.4 billion) more annually for EU permits at current prices.
Earlier this month, Poland’s official statistics body GUS confirmed that year-on-year inflation stood at 5% in July, the joint highest figure in almost two decades. That was largely driven by energy prices, which were up by 6.2% year-on-year.
The European Commission’s “Fit for 55” scheme – which will be negotiated over the next three years – will set even ambitious targets to reduce greenhouse emissions 55% by 2030, rather than 40%. This would force Poland to spend €136 billion on energy transformation in the next five years, according to Dąbrowski.
Deregulating prices would allow them to increase by an average of 25 zloty (€5.45) per month for households, according to PGE. This would neither be an “unnatural increase” nor yield “unjustified profits” for the company, argues Dąbrowski.
However, as electricity prices have steadily risen in past years, officials have made repeated pledges that consumers would be protected from growing costs. The government introduced a system to freeze electricity prices from the start of 2018 until the end of 2019, with compensations to distributors.
It then made a further promise in 2020 to fully compensate every household for rises, but abandoned the pledge in December in favour of only helping “the most vulnerable consumers”.
Main image credit: Ghostavny/Flickr (under CC BY-NC 2.0)
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
