Electricity price debate is highly charged

Electricity prices are again set to surge next year, at least according to some predictions. But other observers say the government warnings of dramatic price rises are alarmist and meant to unfairly implicate the solar industry.

Electricity prices are forecast to rise 9.7 percent for households and 13.9 percent for industry users, according to estimates from the Energy Regulatory Office (ERÚ). That is, unless the government steps in with subsidies to ease the burden on end users. The government has largely blamed the projected price increases on the extra cost of supporting renewable energy, especially solar installations. However, those in the solar industry say they are being used as a scapegoat to allow state-owned energy company ČEZ to raise prices.

"It is realistic. My model is even more pessimistic as it indicates a 10 percent to 11 percent hike for households without the subsidy," said Marek Hatlapatka, an analyst at Cyrrus. "The wholesale price of electricity will go up at least 5 percent to 6 percent year on year, and the renewable resources charge has to expand in line with the higher installed capacity of renewables."

Last year, consumer electricity prices for 2011 had been slated to rise around 10 percent as well, but a government subsidy worth about 12 billion Kč kept the increase at near 5 percent. Industry and Trade Minister Martin Kocourek said the state subsidy would be around 11 billion Kč this year, which should cap the price hikes at 3 percent for households and 6 percent for industrial users.

Fed by extremely lucrative government support set in 2005, solar plants have sprung up around the country. To subsidize the increased cost to the consumer, the government introduced a 26 percent tax on solar plant profits at the start of this year. That tax, however, is currently being contested in court by investors who say it is illegally retroactive.

In addition, those in the solar industry are now arguing that the government electricity price forecast is largely inflated, and that the government is using the solar industry as an excuse to raise prices and benefit ČEZ, the largest utility in the region. ČEZ is currently under investigation by the European Commission for possibly abusing its dominant position on the Czech market.

"We are trying to analyze and understand their reasoning, because it simply doesn't make sense," said Jan Hlaváč, spokesman for the Czech Photovoltaic Association.

The increase in solar plants has almost come to a standstill because of new legislation, he said, so such a spike in electricity costs seems unwarranted.

He also pointed out that, in 2010, the government completely overshot the mark, originally forecasting price increases of 26 percent.

"We believe in the coming months there will be more news about possible price increases because of solar, because it is in the interest of the government and ČEZ to ... maintain the image of the solar industry as public enemy number one," Hlaváč said.

New legislation limits the size and location of solar plants. It halved subsidies for new plants connected to the grid after last December and then did away with subsidies altogether in March.

After the rush of solar companies to connect plants to the grid before the 2010 deadline, the growth in solar capacity has slowed dramatically. This year, through June, only 63 new plants have launched, and applicatons for connections to the grid have been frozen since March 2010.

Despite the slowdown, Hatlapatka said the government must find a way to cover the costs of previous growth.

"The government has no other option than to provide some subsidy to household electricity prices," Hatlapatka said, adding that in addition to the solar tax, the government will receive revenue from emissions permits, which should keep price increases below 10 percent over the next few years.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com