A new crusade in Brussels over the price of electricity

It was evident already in 2010 that the Orbán government considers the nationalization of utility companies one of its priorities. Indeed, by now almost all such companies, including, believe it or not, those of chimney sweeps, have been nationalized.

In 2013 the government, in an effort to bolster its sagging popularity, slashed retail utility rates. With this move the government killed two birds with one stone. The much-advertised cut in utility prices made the government very popular practically overnight. It also resulted in serious losses for E.ON, a German-owned gas and electricity company, and practically forced the German owners of E.ON to bail and sell the company to the Hungarian state. As it turned out, the Hungarian government paid far too much, 260 billion forints, when the assessors claimed that E.ON was actually 600 billion forints in the hole. Obviously, price was no object. Orbán wanted utility companies to be in state hands.

Once this was done, the government set about to lower prices in three stages. Critics warned that producing gas and electricity at a loss would mean that these utilities would not be able to undertake the technical innovations necessary for improved service. Once again, however, Viktor Orbán was lucky, at least in the case of natural gas. In the last couple of years the price of gas on the free market has fallen around 40%, yet the state did not lower the price it charged consumers anywhere close to that amount. Given the state’s monopoly in the energy sector and the government-regulated price structure, the profit margin of the state utility companies must be considerable. According to some estimates, Hungarian families pay about 25% more for gas today than they would if there were no fixed prices and if true market conditions existed.

Independently from all this, the European Commission is working on a so-called “winter energy package,” which is a comprehensive plan for the creation of an “energy union.” One particular provision of this proposal caught the eye of the Hungarian government: the abolition of government-set prices for electricity retailers over a five-year period. If adopted by the European Council, the body consisting of the prime ministers of the member states, Hungary will no longer be able to keep electricity prices artificially low. Hungary has among the lowest electricity rates in the EU. In Denmark consumers pay 0.309 euros per kWh, in Germany 0.297. In Hungary the price is 0.111 euros per kWh. Only in Bulgaria is electricity less expensive than it is in Hungary. The European Council is convinced that artificially low prices discourage the conservation of energy and deter investors.

electricity

So, the Orbán government decided to launch a new “war against Brussels.” Viktor Orbán announced in his Friday morning radio interview that “the government will not allow Brussels to eliminate the government’s power to set prices.” Such a move, he emphasized, would put an end to the government’s ambitious plan to lower utility prices even further in the future. He promised to defend “utility decreases,” adding that “it will be a difficult struggle but we have a chance of success” because Hungary’s position in Brussels has been greatly strengthened. Naturally, due to his outstanding political success on the world stage.

Szilárd Németh, who was chosen to be the “utility tsar” back in 2013, was given a new mission. The result? He announced that the government had found the remedy. The government will endow the Hungarian Energy and Public Utility Regulatory Authority (MEKH) with legislative powers which, in his opinion, could derail Brussels’ intentions of abolishing fixed electricity prices.

Németh outlined the terrible state of affairs during the socialist-liberal governments (2002-2010) when electricity prices went up by 97% and the price of gas tripled while inflation was only 58%. The evil foreign owners “lugged out 1,200 billion forints of profits.” But then came the Fidesz government which froze prices in 2010, and in the next two years prices rose only very little.

This is not what the author of a very thorough article remembers about the course of natural gas pricing. According to her, in 2012 one MJ of natural gas up to 1,200 m³ use was 15% more expensive than before the Orbán government came into power. Her final estimate is that if the Orbán government hadn’t touched gas prices at all, the average consumer would pay significantly less than he does today.

In discussing the evil deeds of Brussels, Németh stressed that the European Union cannot constantly ignore Hungarian sovereignty. “Hungary didn’t join the European Union to give up everything it possesses.” The decrease in utility prices is a question of sovereignty and national security. It is up to the Hungarian government to decide how it wants to help Hungarian families. Obviously, the government doesn’t want to help only those families who need assistance. Otherwise, it could offer subsidies to people whose income is insufficient to pay the full price for utilities. No, the government wants all Hungarians to be grateful that they are getting a break on their utility bills thanks to Fidesz.

The most interesting twist in Németh’s story came at the end of his press conference. He admitted that in 2013 the Hungarian parliament had extended the right of legislative powers to MEKH but that the European Union considered the decision illegal and subsequently the Hungarian government had to annul the law. So, I don’t know why the Orbán government thinks that this time around they will be more successful than they were three years ago.

All the talk about fighting Brussels on electricity prices is most likely just a political ploy. The Commission’s recommendations are just that, recommendations. The final nod comes from the European Council where Hungary is represented by Prime Minister Viktor Orbán. He can vote against the proposal.

My guess is that now that the migrant issue has lost its appeal, the government has decided to turn its attention to utility decreases which were so successful in gaining voter support before the last election. Fighting Brussels over a pocketbook issue can most likely be dragged out until 2018.

December 3, 2016
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Member

Everything Fidesz hates becomes a question of Sovereign and National security. Everything they like; EU Money, becomes their right for being oppressed and taken advantage of by the ‘West’.

webber
Guest

I hope the opposition sticks with the unfairly high price of gas in Hungary, and says it “supports” the government’s efforts to keep electricity prices low. opposition also needs to be a bit populist.
Also, because you cannot have it both ways.
You can’t argue that electricity prices should be higher to discourage consumption, and at the same time argue that gas prices should be lower (Shouldn’t consumption of gas, then, also be discouraged through higher prices?)
And who in their right mind believes that the average Hungarian, with awful wages and high levels of poverty, is wasting electricity because of “low” prices? Low for whom? Not for the average Hungarian consumer.

webber
Guest

Was your friend harassed before or after Szijjarto made his statement?
I have been to Kolozsvár several times and have spoken Hungarian with friends there every time, and had no problems ever. But I have not been there since Szijjarto spoke.

ferenc
Guest
Just came across this article on BBJ (http://bbj.hu/economy/orban-wont-let-brussels-interfere-with-energy-prices_125698), and wanted to comment with it on a previous post, but Eva was ahead with this post. Related article from the EC’s proposal: https://ec.europa.eu/energy/en/news/commission-proposes-30-energy-efficiency-target My first thought when reading the mentioned BBJ article was: oh oh elections on their way……. And now some thoughts about the subject at hand: 1.Have doubts if the international energy business can be considered a real open market, developed societies are (too) much dependent on the chain of their energy supplies, from the real (far away) sources to the actual usage. This causes a lot of opportunists to make money/misuse/gain power through this business, opportunists in all stages of the energy chain by as well private companies as states/governments. How else can these enormous price fluctuations be explained? 2.In order to make our world/globe really sustainable an energy transition from (mis)using natural resources (oil, gas, coal, etc.including nuclear) to using natural energy (sun, wind, bio, etc) is essential. One possible tool in achieving this transition is the price of energy, but it should not be applied as the only tool. People should first be made aware of the current situation incl.necessity of transition and then a deeper… Read more »
ferenc
Guest

PS1: As far as I understand Hungary is not alone on this globe, so in order to sustain here, it’s best to work together with as much as possible neighbour, continental and global countries.
PS2: “Hungary didn’t join the European Union to give up everything it possesses.”, well as I’ve written before Hungarians possess more pride than necessary for their own well-being (i.e.good)……
PS3: As having no own energy resources, stimulation of development in natural energy usage are strongly reccommended in Hungary.

ferenc
Guest

OT: ‘important’ urgent terror warning from ‘Péterke’: http://www.kormany.hu/hu/kulgazdasagi-es-kulugyminiszterium/hirek/fokozott-ovatossagra-inti-a-kulugyminiszterium-a-kulfoldre-utazokat
here in western-europe no news about such, anybody here more info?
if not or not yet, could be because of weekend or may be not increased risk
when I saw this (hirtv) my first thought was: possible connection with Ahmed H.’s 10 years sentence
two possibilities: a.really increased terror risk / b.HU-government stirs up terror fears, to justify absurd sentence

Guest

Totally OT – but really good news!

Seems that the Austrians elected the Green candidate von Bellen as their new president!
As we say in German “a stone fell from my heart”.

I was on the road today from Hungary to Germany and when I saw the billboards in Austria …

Hofer’s billboards weren’t as aggressive as the last time – but for me this was enough:
Every billboard had the text:
“So wahr mir Gott helfe” – So help me god
He or his fascist party just had to bring religion in – but luckily it
didn’t help them, though it was close!

What has the democratic world come to with Trump, Orbán and the other mini dictators and now even Austria almst fell …

ferenc
Guest

‘Gott hat ihm durchschaut, und gab seine Hilfe an andern’
God saw right through him, so gave his help to others

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