In 2013, Hungary has introduced a 10% household utilities price cut in the field of electricity, gas and district heating. To ensure thorough enforcement of the price cuts, the country's energy regulator was restructured and several barriers were set to prevent energy companies from passing on these burdens to consumers.
To ensure that utilities companies comply with the above-mentioned price cuts, the Hungarian Parliament approved a bill that restructures the country's energy regulator, Hungarian Energy Office (MEH). The bill, which was passed during an extraordinary session held on 14 March 2013, will become effective on 4 April 2013. Pursuant to the new law, the legal successor of MEH, an independent regulatory body called the Hungarian Energy and Public Works Regulatory Authority, will oversee electricity, gas, district heating, water and waste collection services. The new authority will also have the power to issue decrees.
The head of the new authority will be appointed by the prime minister for a period of seven years. The chairman may serve a maximum of two terms. The chairman may appoint at most five deputies, who also hold seven-year mandates.
The new authority will answer only to the law and be accountable only to Parliament. With this step, the government wants to prevent that decisions affecting the price cuts can be contested at court and to limit challenges being filed with the Constitutional Court against decrees issued by the new energy authority. Since the new authority will have regulatory, price-determining and licensing power at the same time, doubts have already been expressed whether the restructuring, once effective, will be in compliance with the relevant EU legislation.
The Hungarian government mandated a 10% reduction in gas, electricity and district heating prices from the start of 2013 by reducing the different elements of the total prices (e.g. service charges, network usage fees, etc.) by different proportions. Several gas companies turned to the courts over this decision, arguing that MEH, the body responsible for determining electricity and gas network usage fees, should allow companies to incorporate extraordinary taxes such as the utility network line tax, financial transactions duty and increased income tax and calculate them as justified costs when determining network usage fees. The Metropolitan Court of Budapest recently ruled in the companies’ favour.
As a response, the Parliament on 12 March 2013 enacted amendments (effective as of 14 March 2013) to the relevant laws on electricity and gas services to prohibit utilities companies from passing on to the consumers the burdens stemming from the utility network line tax, financial transactions duty and increased income tax, thus ensuring the effective application of the reduction of household energy prices. The restructuring of MEH quickly followed the above amendments as a further step in the government’s declared campaign to secure the implementation of a 10% cut in household energy prices.
Further changes are expected in the energy sector, as an MP of the governing Fidesz party submitted a further bill to Parliament on March 13 that would cut household water and waste collection fees by 10% from 1 July 2013. The proposal would limit the prices to 90% of those that had been effective on 31 January 2013.
This bill would also prohibit waterworks and waste collection companies from passing on to the consumers the cost of extraordinary taxes such as utility network line tax, increased income tax and the financial transactions duty.
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