More pain for consumers as gas prices go up again

  • 2008-07-30
  • Staff and wire reports
RIGA - The Public Utilities Commission on July 24 approved an average 38 percent gas tariff increase for Latvia's natural gas utility Latvijas Gaze. The new tariffs will go into force on October 1 but are not expected to change "over the next two years," Commission council chairwoman Valentina Andrejeva said.
Latvijas Gaze board chairman Adrians Davis said that tariff hikes mean that consumers have to economize on energy resources, not keep the windows open in winter and then complain that heating is expensive. He says that the government also has to introduce energy efficiency programs.

The new tariff plan introduces changes in the tariff structure, increasing costs for all customer groups. According to the regulator, each consumer group has a unique tariff schedule. Household consumers using just four cubic meters of gas a month, for example, will pay about 2.08 lats (2.95 euros) instead of 1.57 lats, a 32.5 percent increase.

For a residence consuming about 250 cubic meters of gas per month for heating, the monthly bill will rise from 50.69 lats to 85.23 lats, 68.1 percent higher. Corporate customers will see between 32-38 percent increases in their bills, depending on consumption patterns.
The natural gas tariff jump will mostly affect steelworks companies, board chairman of the Association of Mechanical Engineering and Metalworking Industries of Latvia, Vilnis Rantins, said.
He believes that steelworks company Liepajas Metalurgs, Krasainie Lejumi aluminum alloy and others basically using natural gas, as well as producers using natural gas heating systems, could experience the most serious difficulties.

Latvijas Gaze board chairman Adrians Davis expressed dissatisfaction with the tariff result as the initial request was for a 57 - 71 percent hike for households and small consumers, and a 24 - 36 percent increase for larger customers.
Davis said that the energy market isn't predictable, and that such a large increase in prices is dictated by demand, which currently exceeds supply in global markets.
Latvijas Gaze has been forced to request higher tariffs due to Russian gas monopoly Gazprom's higher prices.
As seasonal gas stocks have been built up, says Davis, prices should drop in November, December, and, natural gas price will follow. "In my opinion, prices will drop in the winter period, and consumers will be the winners," he said.

Davis wouldn't confirm nor deny if Latvijas Gaze would ask for new tariff hikes next year. He said that with growing expenses, and tariffs remaining at current levels, the company will have to curb development plans. The company's development will also be influenced by the regulator's decision to adopt a lower tariff hike than demanded by Latvijas Gaze.
"If [we] don't earn the profit needed for investments, the loser will be not only Latvijas Gaze, but also Latvia in general," said Davis. Implementation of the natural gas supply security and reconstruction program, which is not influenced by tariff changes, will continue, he adds.

Municipal heating company Rigas Siltums will also increase by 30 percent its tariffs on city heating, says spokesman Andris Sprogis. Sprogis said that the final tariff on heating from Rigas Siltums should become effective simultaneously with the gas tariff rise, on Oct. 1.
Rigas Siltums raised heating tariffs already twice this year. On Feb. 1, the heating price for residents of Riga increased by 18.2 percent to 32.47 lats per megawatt hour, not including VAT, while on May 1, the tariff was raised another 9.2 percent.

Latvijas Gaze is a publicly listed company engaging in the purchase, transportation, storage and distribution of natural gas. Key owners are Germany's E.ON Ruhrgas, Russia's Gazprom and Itera Latvija.