Energy prices keep heading higher

  • 2010-06-17
  • Staff and wire reports

EASY MONEY: Monopoly pricing leads to economic loss to society.

RIGA - The announcement by the Latvian gas supplier Latvijas Gaze of its upcoming hike in gas tariffs indicates that this Latvian monopolist is not ashamed to dictate its conditions to consumers, believes Member of the European Parliament (MEP) Krisjanis Karins (New Era), reports news agency LETA. “The monopolist should justify why it has raised prices despite stable energy prices worldwide over the past year,” stressed Karins.

He noted that oil prices have stabilized over the past 12 months, so there is “no justification for this increase in gas prices.” Karins pointed out that the current situation was actually the opposite and that with the worsening predictions for the world economic situation, gas prices are set to fall, said the MEP’s advisor Janis Patmalnieks.
“The situation points to the necessity of solving Latvia’s energy question. While we are dependent on Russian gas suppliers, we have to deal with unstable energy prices. It is necessary that we increasingly use renewable energy sources for electricity and heat production in order to ensure price stability and full use of Latvia’s natural resources,” said Karins.

Natural gas tariffs for households will increase by 17.1 - 31 percent on July 1, according to an announcement by Latvijas Gaze in the government’s official newspaper Latvijas Vestnesis. Customers who use natural gas for cooking and water heaters will be charged 17.1 percent more. Meanwhile, customers who use natural gas for heating (up to 25,000 cubic meters annually) will be charged 31 percent more.

Tariffs fell on July 1 last year by 17 percent and 27 percent, respectively. On Jan. 1, 2010, tariffs fell by a further 5 and 9 percent. The new rates will be in force until Dec. 31, 2010.
Natural gas tariffs for households automatically change twice a year, on January 1 and July 1. Tariff changes are dependent on the purchase price for natural gas, and correspondingly, on petroleum product prices, currency values, and the size of the reserves at Latvia’s Incukalns storage facility.

On top of higher gas prices, heating tariffs will also increase significantly in Riga this month, reaching 40.13 lats (57.30 euros) per megawatt/hour, says heating company Rigas siltums spokeswoman Linda Rence. The heating tariff has been set based on the announcement of natural gas prices published by Latvijas Gaze.
Compared with March this year, when the tariff was 29.24 lats per megawatt/hour, the rate will rise in June by 37 percent, while compared with May, when a tariff of 36.05 lats was charged per megawatt/hour, the tariff will rise by 11 percent, show LETA’s calculations.

After a gradual decrease in mid-2009, the heating tariffs remained at 29.24 lats per megawatt/hour from mid-November last year to this March. In April, the tariff was raised to 34.69 lats per megawatt/hour, or by 18.6 percent.
From May 1, the tariff rose to 36.05 lats per megawatt/hour (VAT excluded) - 23.3 percent more than in March and 5.2 percent more than in April.

In July the tariff could increase by a further 7 percent due to a new excise tax on natural gas, said Rence. “Unfortunately, the tariffs are expected to increase. Hopefully though, Rigans will not feel the increase that much in summer, because [in summer] heat energy is only used to heat water,” said Rence.
Profit at Latvijas gaze reached 6.7 million lats in the first three months of this year, reports the Riga Stock Exchange, referring to a company report. In the first quarter of 2009, LG earned 5.7 million lats profit. LG also achieved 155 million lats in net turnover in the first quarter of the year.

LG sold 127 million cubic meters of gas to its customers in the first three months of the year; the sales volume dropped by 18 percent, compared with the results of the first three months of last year.
Latvijas Gaze posted 20 million lats in profit in 2009, about the same as the company earned in 2008. In 2009, LG sold 1.49 billion cubic meters of natural gas, 8.5 percent less than in 2008.