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SPP Proposes 23% Hike in Gas Prices

Today is the last day on which the main gas utility SPP can file for a price hike in 2012 for households. Here The Daily provides you with a translation of an article published in today’s SME on the issue.

Article by  Daniela Krajanová, translation by Language Sense

SPP has already proposed a hike of one quarter. The hike in gas prices is being assessed by the regulator.

photo (c) James Riden

The gas utility is requesting a 23 percent hike in prices. Now the regulator must decide on the proposal.

Slovensky plynárenský priemysel (SPP) has presented the regulatory authority with its idea of gas prices that should be applied to households next year. It should be a 23 percent increase. No other proposal was approved by the company Board of Directors.

Their proposal is now being examined by the regulatory authority. In the past, it already said that it saw no reason for a growth in gas prices for households next year. The proposed increase in prices by around one quarter faces criticism also from the Ministry of Interior. It claims that a change to the contract between Gazprom and SPP is about to be finalised, which will mean cheaper gas from the Russian giant. The proposal of SPP does not count with that, though.

An increase in gas prices for households doesn’t seem right either to former economy minister Ľubomír Jahnátek (Smer). He would welcome a return of the law that would hold back SPP in the submission of price proposals.

Gas prices- how they have changed

January 2006: + 5.84%
November 2006: +4.26%
January 2007: -4.04%
January 2010: -5.13%
January 2011: + 4.47%
July 2011: + 6.92%
2012 (proposal of SPP) + 23%

SPP has presented the regulatory authority with its idea of gas prices for next year

The hike in gas prices by almost one quarter has been forwarded for approval by the regulator.  Former economy minister would welcome a return to the law that would hold back SPP in the submission of price proposals.

Slovenský plynárenský priemysel (SPP) is obviously serious about hiking up gas prices for households by 23%. When the company’s Board of Directors recently approved such a proposal, further discussion on the matter was expected. This did not happen, though. “We know only about this proposal” said spokesman for the Ministry of Economy, Róbert Merva. He added that SPP could send to the regulator only a proposal that has been approved by the Board of Directors of the company.

The company has already submitted a proposal
SPP confirmed that it had already presented the regulator URSO with a proposal of prices for the supply of gas for households for next year. “When preparing it, we proceeded in line with the law on regulation and respective executive regulations” said SPP spokesman Ondrej Šebesta.

SPP claims that it wants to discuss gas prices on an expert level. It will only comment in more detail about the proposal once the regulatory authority has decided on it, though. The regulator is led by Smer-SD party nominee Jozef Holjenčík. Several times he has said that he sees no reason for a growth in gas prices next year.

The regulator will start examining the proposal of SPP after All Saints Day tomorrow. The idea of increasing prices by around one quarter was criticised by the department of the economy, It claims that a change to the contract between Gazprom and SPP is on the horizon. SPP would therefore receive cheaper gas from the Russian giant next year. Yet, SPP does not calculate with this in its proposal. An increase by 23 percent doesn’t seem right either to former economy minister Ľubomír Jahnátek (Smer). “We will definitely think about how to stabilise prices” he says. One option is to revert back to the Act on the submission of price proposals in trading companies, referred to as the Lex SPP, from the workshop of Fico’s government. It was cancelled by Radičova’s government. In Jahnátek’s opinion, companies should not approve price proposals in the Board of Directors, but at the General Assembly.

As the foreign shareholders of SPP have a majority in the Board of Directors of the company, and the state was able to veto them at the General Meeting, SPP could not proposal higher prices without the consent of the state. This because the foreign shareholders purchased also managerial control in the privatisation along with a 49 percent stake. Gas prices are derived from the prices of oil, heating oils and from the euro-dollar exchange rate, because SPP buys gas from Gazprom in dollars. Some analysts say, though, that the development of prices or the exchange rate do not indicate the need for a gas price hike by 23 percent.

Background facts

Shares in SPP
- the state has a 51 percent share in the company.
- the rest is owned by the foreign shareholders – German E.ON Ruhrgas and French Gaz de France. Even though they have only a minority, they purchased also managerial control over SPP together with the stake.
- Energeticko-priemyselný holding owned by PPF Petra KelInera, J&T and Daniel Křetínsky, wants to buy part of the shares from the foreign shareholders .

Gas prices for households can only go up once the regulatory authority has agreed with it.

1 Comment for “SPP Proposes 23% Hike in Gas Prices”

  1. George M

    Next government if Fico run , increase zero . If anyone else 23% ….

    FICO OWNS THE REGULATOR !

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