June 14, 2019 / 6:02 AM / 2 months ago

Poland removes power price cap for big clients despite attempts to curb costs

WARSAW, June 13 (Reuters) - Poland’s parliament removed a power price cap for big customers late on Thursday, dashing industry hopes the government would be able to curb spiralling costs that have already led to some plant closures.

Wholesale power prices in Poland jumped last year following a surge in carbon emission costs and coal prices because the country generates most of its electricity from polluting coal.

To prevent a surge in prices for households and bigger consumers ahead of elections in the European Union and at home, the ruling Law and Justice (PiS) party passed legislation in December aimed at freezing power prices at mid-2018 levels for all Poles.

While the cap worked for households, which represent a regulated segment of the market, it was not effective for companies and local authorities that normally buy electricity based on market prices.

The cap for big clients did not work because the energy ministry has not issued supplementary regulations that would have clarified technical issues related to prices at which companies buy electricity.

“Electricity sellers apply current prices, as the so-called electricity law from December does not work,” a spokeswoman at state-run coking coal producer JSW said in an e-mailed statement.

JSW’s costs related to power purchases rose by 36 percent year-on-year in the first quarter.

The regulations have also been questioned by the European Commission, especially in terms of planned compensation for energy groups that face losses on the sale of power.

FUTURE CONCERNS

The latest amendment, approved by the lower house of the parliament on Thursday, removes the price cap for mid-size and big companies from July 1. The biggest power consumers hope they will be granted more substantial help based on separate legislation that is being processed by the government.

However, companies and analysts are concerned about a further surge in power prices in 2020 and beyond because carbon emission costs are expected to continue to rise.

“We currently analyse options to buy power from renewable sources,” said Tomasz Slezak from Poland’s unit of ArcelorMittal , which decided to temporarily close its furnace in Krakow due to rising power prices.

Poland’s rising power prices and energy policy are also an issue closely followed by appliances maker Whirpool, whose plants in Lodz in central Poland have faced a surge of 9-29% in electricity prices this year.

Poland has no clear long-term policy, although the energy ministry said in a draft document last year it planned to reduce the share of coal in power production to 60 percent by 2030. It also wants to build off-shore wind farms but at the same time has started investment in another coal-fuelled power station.

Average power prices on the day-ahead market rose by 18 percent year-on-year to 218 zlotys per MegawattHour in the first quarter, compared with 178 zlotys in Germany and 191 zlotys in the Czech Republic, data by the biggest power producer PGE showed.

“The problem of next year and a real increase in power prices remains open,” said a spokeswoman at Fiat Chrysler Poland , which owns nine factories in the country. (Editing by Paul Tait)

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