With the Government’s package of measures, the price of gas for households rises by an average of 16 percent

The Government’s package of measures will significantly mitigate the increase in gas prices, so gas for households using the public gas supply service will increase by an average of about 16 percent from the beginning of April, while without these measures the increase would be around 77 percent, announced the Croatian Energy Regulatory Agency (Hera).

The Management Board of Hera made a Decision on the amount of tariff items for the public gas supply service for the period from April 1 to December 31, 2022, and for the period from January 1 to March 31, 2023, as well as a Decision on the amount of tariff items for guaranteed gas supply for end customers who are not households for the period from April 1, 2022, to June 30, 2022, at a meeting held earlier this week (March 7). These decisions were published in today’s Narodne novine (NN 32/22), and thereafter Hera published a detailed statement on the increase in gas prices on its website.

Hera reminds that, based on the Methodology for determining the amount of tariff items for the public gas supply service and guaranteed supply, the final price of gas for the public gas supply service consists of three components – the cost of gas procurement, the cost of gas distribution, and the cost of gas supply, and is expressed through the tariff item for the delivered quantity of gas (Ts1) and the fixed monthly fee (Ts2).

Gas procurement cost increased by 141 percent

The cost of gas procurement reflects the price of gas on the reference gas market and represents the wholesale component in the structure of the final gas supply price.

– By applying the appropriate formula from the Methodology, and according to data from the TTF market (prices of futures contracts ‘TTF Price Assessment – Summer 22’ and ‘TTF Price Assessment – Winter 22’, published from April 1, 2021, to February 28, 2022), the cost of gas procurement for the period from April 1, 2022, to March 31, 2023, amounts to 0.3425 kuna per kilowatt-hour (kn/kWh), which represents an increase of 141 percent compared to the cost of gas procurement which in the period until March 31, 2022, amounts to 0.1422 kn/kWh (Decision until March 31, 2022, NN 141/21 and 147/21) – Hera emphasizes.

The cost of gas distribution is determined for each regulatory (calendar) year of the 3rd regulatory period 2022-2026, separately for each distribution area, by the Decision on the amount of tariff items for gas distribution (NN 141/21 and 32/22), and the cost of gas supply is determined based on the conducted public tender for the selection of suppliers in the obligation of public gas supply (separately for each distribution area). The cost of gas supply remains unchanged in the three-year period for which the tender was conducted (from April 1, 2021, to September 30, 2024), that is, it remains established in the same amounts as according to the valid Decision until March 31, 2022 (NN 141/21 and 147/21), Hera explains.

Without government measures, gas prices would rise by 77 percent

They further explain that, given the increase in the cost of gas procurement (by 141 percent), the final gas prices according to their decision this week increase on average (excluding VAT) by 77 percent, but this increase is ultimately significantly mitigated by government measures.

– The new gas prices for end customers in the household category who use the public gas supply service in the regulatory year 2022/2023 have been changed compared to the currently valid gas prices due to the change in the cost of gas procurement, whereby the average increase in the final gas price, excluding VAT, from April 1, 2022, according to the Decision amounts to 77 percent – it is stated in the announcement.

Namely, until March 31 of this year, the average final gas price for households in Croatia (excluding VAT) amounts to 0.2607 kn/kWh (consisting of a procurement cost of 0.1422 kn/kWh, an average distribution cost of 0.0592, and an average supply cost of 0.0593 kn/kWh).

However, given the aforementioned increase in the cost of gas procurement to 0.3425 kn/kWh, and without changing the distribution and supply costs, the average final gas price for households from April 1 of this year rises to 0.4610 kn/kWh (all prices excluding VAT), or by 77 percent.

At the same time, according to Hera’s data, the smallest increase of 62 percent is in the distribution area of the distribution system operator Energo, Rijeka, where the supplier in the obligation of public service is Gradska plinara Zagreb-Opskrba, while the largest increase of 89 percent is in part of the distribution area of the distribution system operator HEP-Plin (the cities of Daruvar and Grubišno Polje and the municipalities of Sirač, Končanica, Dežanovac), where the supplier in the obligation of public service is Zagorski metalac.

– The significant increase in the cost of gas procurement is a consequence of the continuous upward trend in gas prices in European gas markets that began in the second quarter of 2021, which is why gas traders subsequently procure gas at significantly higher prices than in previous years. Therefore, the mentioned increase in wholesale prices is also reflected in the retail gas market in the Republic of Croatia – explains Hera.

The Government’s package of measures significantly mitigates the increase in gas prices – to an average of 16 percent

The energy market regulator in the announcement reminds that the Government presented a package of measures in mid-February to mitigate the rise in energy prices, which includes support for gas costs for households, tax relief, social benefits for citizens at risk of energy poverty, and one-time benefits intended for pensioners. The package, among other things, includes a proposal to amend the VAT law which reduces the VAT rate on gas from the current 25 percent to 5 percent and a decision to subsidize the price of gas which introduces support of 0.10 kn/kWh for all households using gas, effective from April 1, 2022.

– The package of measures of the Government of the Republic of Croatia will significantly mitigate the increase in gas prices, and for end customers in the household category who use the public gas supply service, it will result in an increase in the price of gas including VAT on average for all distribution areas of about 16 percent – emphasizes Hera.

According to the data presented, by the end of March this year, the average final price of gas for households in the public service system with the applicable VAT of 25 percent amounts to 0.3259 kn/kWh, and without government measures and with a VAT rate of 25 percent it would have risen to 0.5763 kuna.

However, with the reduction of VAT to 5 percent and with the support of 0.10 kn/kWh, households in the public gas supply system will from the beginning of April pay gas at an average of 0.3791 kn/kWh.

Hera notes that the Government’s package of measures applies to households that purchase gas under regulated conditions from suppliers in the obligation of public service, but also to households that purchase gas freely on the market. For households with market contracts, the impact of the package of measures on the percentage change in price will primarily depend on the price of gas defined in the contract, they add.

Guaranteed supplier – HEP-Plin

Hera in the announcement reminds that for the guaranteed gas supplier in Croatia (mandatory public gas supply service under regulated conditions to the end customer, who under certain conditions has remained without a supplier) for the period from March 10, 2022, to September 30, 2024, HEP-Plin, Osijek has been designated by decision.

In the case of activating guaranteed gas supply, the final price of guaranteed supply for end customers who are entitled to public gas supply service (households) is determined in the amount equal to the final price for the public gas supply service which Hera has determined for the supplier in the obligation of public service in a particular distribution area according to the Decision, states the regulator, which at this week’s meeting also made a decision on the amount of tariff items for guaranteed gas supply for end customers who are not households (business) for the next quarter, that is, the period from April 1 to June 30 of this year.