Publications / Hungarian Energy Market Report
REKK Hungarian Energy Market Report 2013 Q1Published: 1 of March, 2013
Invoicing the futureREKK analysis of the 10% utility bill cut of January 2013 | Recent developments related to the procurement of system reserves | The temporary exemption of the electricity sector under the third EU ETS period

Table of contents

Invoicing the futureREKK analysis of the 10% utility bill cut of January 2013

The endeavour of the Government, referenced as the „utility bill cut”, has triggered fierce reactions both in the media and within the sector. With the article we set out to provide a short, unbiased summary of this package of measures and its impacts. The analysis is based on REKK’s own research. In the interest of a quick analysis, we had to accept a number of regulatory and data deficiencies. Nonetheless, our analysis will point out several important interrelations and changes.

With regard to the utility expenditures of households, natural gas and electricity prices do not count as high, neither compared to the region, nor to the wider World, despite the extremely high VAT rate of 27%. Considering the dynamics of price changes, especially in the case of electricity, the failure of the regulatory authority can be detected for 2009-2010: universal service prices could have been reduced in a market environment characterised by decreasing prices. The utility bills of Hungarian households paid for energy consumption as a ratio of the annual household expenditures is not high within the region, but high in a wider European context.

Recent developments related to the procurement of system reserves

Securing the system level reserves necessary for the uninterrupted operation of the electricity system is the task of the system operator. Before the tender for this year MAVIR substantially changed the methodology of procurement, which, based on the results to date has positively impacted the level of procurement costs. In our article we focus mainly on the developments surrounding the procurement of secondary and tertiary reserves, the largest cost items of all. We report on the most important changes to the method applied by MAVIR, as well as the related advantages, and evaluate the results of the tender procedures that have already been held for this year.

The temporary exemption of the electricity sector under the third EU ETS period

For the third period (2013-2020) of the European emission trading system (ETS) a new principle is applied to allocate to all emission allowances. While the second period was characterised primarily by free allocation (memberstates were allowed to auction up to 10% of the total amount), starting in 2013 only about half of the allowances will be handed out for free. The allocation method was changed by the European Commission because auctioning is expected to eliminate the windfall profit of power plants generated by free allocation, while also ensuring equivalent conditions to new entrants

Author: Zsuzsanna Pató