VILNIUS - Electricity prices for households in Lithuania next year will rise by around 7 cents (two euro cents) per kilowatt-hour (kWh) and prices for commercial consumers will go up between 5.3 to 6.5 cents, including VAT.
Economic analysts said that while businesses may suffer, households are not likely to see noticeable price hikes until Ignalina Nuclear Power Plant shuts down at the end of 2009.
"This will have limited impact. I am not being pessimistic. We are looking at 2010 when we expect electricity prices to go up by 80 to 100 percent," SEB Bankas analyst Gitanas Nauseda told The Baltic Times.
Nauseda said prices would affect businesses whose overheads are heavily dependent on electricity prices.
"It depends on the economic branch they are in. In some businesses, electricity is one to two percent of their costs. Others, it is 10 to 15 percent. For competitiveness of these companies, it is a negative factor," he said.
Vakaru Skirstomieji Tinklai, West Lithuania's operator of the national distribution grid, is set to increase the price for households by 5.9 cents per kWh, and the price for commercial consumers by 4.5 cents.
Rytu Skirstomieji Tinklai, the operator of the eastern grid, intends to increase prices by 5.93 and 5.5 cents, respectively.
VST declined to make a comment by the time The Baltic Times went to print.
The management boards of VST and RST set the new prices, which do not include VAT, but the prices are yet to be approved by the National Commission for Prices and Energy, which will announce final prices to consumers in late November.
Prices for consumers are rising due to increased electricity production and transmission prices.
"The upper price limits would allow increasing the electricity distribution price by 5 centas, but the companies [RST and VST] agree to a rise of 0.9-1 centas," Commission Chairman Virgilijus Poderys said.
"If the distribution price rose by 1 centas, then the overall increase would be 5.5 centas per kWh. The total price for a household should be around 33.5 centas per kWh, plus the value added tax," he said.
Poderys said that the rise in prices could be directly attributed to the rising price of gas, which is increasingly being used with the partial shut down of the power plant at Ignalina.
The Ignalina Nuclear Power Plant is being shut down at the end of 2009 in accordance with the European Accession treaty that Lithuanian signed in 2004. The power plant is Lithuania's main source of electricity and will leave the country energy-dependent after its shutdown.
SOURCES OF POWER
Estonia has offered Lithuania up to 500 MW of electricity, the news station LTV reported. Estonian Prime Minister Andrus Ansip said Lithuania "could get 100, 200 or even 500 MW of electricity easily. However, we may need additional emission allowances, which would have to be purchased at auction, meaning additional expenses for us. So we will have to negotiate the price of electricity being sold."
Estonia is connected to the Finnish grid through its Estlink undersea power cable.
Lithuanian diplomats failed to convince the European Council to add to the meeting's conclusions on authorization for the European Commission to evaluate the situation after the plant's closure. The Council believes that Lithuania is in no danger of electricity shortages, and that the Estonian offer could provide sufficient supplies in case of any emergencies during the winter.
The Commission however would provide support in the form of financial compensation to cover the increase in costs for the purchase of emission allowances and the rise in demand for Russian gas.
Lithuania has to notify the European Council of its specific plans at the next Council meeting in December.
The Baltic States and Sweden are currently in negotiations to build a power link across the Baltic Sea forecast to be operational by 2012 at the earliest. It is the favored solution to the energy crisis that Lithuania will face between Ignalina's shut down and the completion of its replacement power plant, which should be finished by 2018.
Details of the plan to connect Latvia and Lithuania to the Swedish grid are still under debate.
Latvia's Prime Minister Ivars Godmanis opposes Vilnius' wish to build the power link between Lithuania and Sweden, reports news portal vz.lt. He says that Lithuania already has "too much responsibility" to meet, including the shutdown of the old nuclear plant, construction of a new nuclear facility and the construction of a power link with Poland, and wants to see the link built to Latvia.