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The future of energy prices in the coming years will be determined by the new governement’s ability to release the potential of renewables, but for now they will remain frozen albeit at a less generous level than what the outgoing government had planned – writes Jacek Perzyński, editor at BiznesAlert.pl.
Sejm rejects government bill on energy prices freeze
On December 6, the majority of the Sejm rejected in a vote the government’s draft law on freezing electricity prices in 2024. The Civic Coalition and the Third Way voted against the bill.
The government proposed to freeze energy prices and distribution costs at the level from 2022 for the entirety of 2024 within the limit of 3 MWh that has been also binding this year. At the same time, for households engaged in agricultural activities, families with the “Big Family” card (families with more than 2 kids – ed.) as well as people with disabilities, the limit on preferential electricity consumption was increased from 3 to 4 MWh or 3.6 MWh, respectively. If these customers become eligible for an increased preferential electricity consumption limit (4 MWh or 3.6 MWh) during 2024, the limit is to be applied in proportion to the number of months in 2024 in which they have met the requirements for the acquisition of these allowances.
According to the calculations of the Climate Ministry, the proposal in 2024 would generate a total cost of more than PLN 31 billion (in 2024 – PLN 25.5 billion ; in 2026 – PLN 5.6 billion). It would be bankrolled from public funds.
Opposition less generous
In contrast to the government’s draft, the Civic Coalition and the Third Way provide for a freeze of energy prices at this year’s level, but only until the end of June 2024. The Sejm adopted this proposal on 7 December.
The Civic Coalition bill freezes the price of electricity at the level of PLN 412/MWh. Such a rate is to be eligible for consumption in the first half of next year to a maximum of 1.5 MWh of energy for households, 1.8 MWh for households with a person with a disability or 2 MWh for customers who run farms or for holders of the “Big Family” card.
After exceeding the above thresholds, the rate for electricity at the level of PLN 693/MWh will apply. This rate is to be maintained for local government units and public utilities.
The bill will be paid for with money from the COVID-19 Fund, which will get funding from a gas fee paid into the Price Difference Payment Fund for 2022 and other funds. In the case of the project submitted by the opposition, the cost was estimated at PLN 16.5 billion.
Onshore wind to be handled later
While the opposition’s draft assumes less public assistance in the energy price market, it is rather focused on preventing further increases.
Last week, members of the Civic Coalition and Poland 2050 submitted to the Sejm a proposal to freeze energy prices, which also included regulations aimed at liberalizing the legislation on the construction of onshore wind turbines. The proposals changed the minimum required distance between wind turbines and nature reserves, national parks to 300 meters, which was deemed by some activists as “going too far”, while the politicians from Law and Justice called the proposition a “wind turbine scandal”.
On December 6, the members of the Civic Coalition submitted an amendment, which removed the provisions on wind power plants from the draft. According to the statements of representatives of the opposition, the issues of freezing energy prices and the construction of farms are to be separated. It is not yet known when the new rules will be introduced. However, the opposition has already announced changes and wider consultations.
Orlen has to pay
Last Wednesday the Energy and Finance Committees discussed the opposition’s draft on freezing gas, energy and fuel prices in 2024. However, the debate turned into a dispute over the bill imposing an obligation on Orlen to pay the so-called gas fee.
According to the opposition, the project to freeze energy prices until mid-2024 is expected to amount to 16.5 billion zlotys. The source of funding will come from the Covid-19 Fund, which will be sponsored by the gas fee paid to the Price Difference Payment Fund for 2022 and other financial means specified in relevant regulations. This means that Orlen will have to contribute about PLN 14 billion in the gas fee, and the rest will come from the state budget. However, the project provides for partial compensation for this company.
It should be noted that electricity producers and energy undertakings carrying out business activities in the field of electricity trading are obliged to transfer a write-off to the Price Difference Payment Fund, whose task is to protect customers from excessive increases in energy prices.
Opposition responds to allegations
During the commission’s deliberations, Law and Justice members objected, claiming that the opposition wanted to charge Orlen with the help of EU legislation.
“The European regulation allocates the burden of costs to all energy companies. So why the costs has been imposed on one company only|,” asked Zbigniew Kuźmiuk from Law and Justice during the parliamentary Committee sitting on this project. “This is a kind of punishment and it is not very clear why a leading company in the energy sector is being punished,” he said.
However, the opposition emphasized that the project was not directed against a particular entity, claiming that the current government is to blame as it monopolized the energy market. “One company is not indicated, but there is open space for different companies,” argued Krzysztof Gadowski from the Civic Coalition during the Commission’s deliberations. “Since the Law and Justice created a monopoly, it must face it. We’ve always wanted a few players,” he added. The only company that meets the definition of the entity that bankrolls the Price Difference Payment Fund is Orlen. “The framework was set by the European Union regulation,” assured Krzysztof Gadowski.
“These charges are absurd. We use European solutions from the extraordinary profits regulation. The Law and Justice government did not want to use the PLN 41 billion, which Orlen gained during the energy crisis in 2022,” answered MP Tomasz Nowak (Civic Coalition) to the question from BiznesAlert.pl about the Law and Justice accusing the opposition of punishing the company.
Nowak also questioned the legitimacy of the COVID-19 fund, but admitted that the opposition intends to use the tools created by the government of the United Right.
Poland 2050 MP Paulina Hennig-Kloska pointed out that after the absorption of PGNiG by Orlen, the consolidated profit of this company in 2022 and three quarters of 2023 amounted to PLN 50 billion, but noted that the cause was the energy crisis and not good management.
She added that with the introduction of the EU regulation on excess profits from the sale of fossil fuels, the Law and Justice government introduced only “partial” taxation, while the opposition project introduced it fully.
Onshore wind to be unleashed later
The opposition’s proposal on the energy price freeze is less generous than the government’s bill, as it assumes that fixed energy prices will only take effect until the end of June. Although the Act also provides for intervention in the event of a sudden increase in energy carriers, the assumption is completely different from that of the government act, as it focuses on increasing public assistance and increasing the capacity of renewable energy sources.
Although the rules on the construction of wind farms have now been withdrawn, the Civic Coalition and Third Way announced further work and regulatory consultation in this area, because wind farms are supposed to help lower prices, and state intervention will not be so much needed in cases of further price increases. However, at the moment it is not known when this will happen.
