On Tuesday, 27 September, Latvia’s government approved a new package of support to help compensate energy resource price increase for households and businesses.
By adding amendments to the Law on Measures to Reduce Extreme Rise in Energy Prices, Latvia’s government approved four new support measures for households and legal persons to partially compensate the rapid energy price increase.
Amendments now have to be passed by the Saeima.
There are three measures intended for households and one – for legal persons.
The funding necessary to afford new support measures is EUR 422.2 million.
According to Minister of Economics Ilze Indriksone, the state has approved a massive support package for households and legal persons, including associations, education and healthcare institutions.
To provide additional support for households, the government has approved the offer from the Ministry of Economics on differentiating centralised heating support –
centralised heating supply tariff of 68 – 150 EUR/MWh will be compensated at 50%, for portions of the tariff that exceed 150 EUR/MWh, the state will compensate 90%.
For example, if the heating energy tariff is 340 EUR/MWh, the state will compensate 212 EUR/MWh, whereas the end user will pay 128 EUR/MWh. This means that in this particular case the end user’s end tariff will be compensated at 62%.
Estimates if the tariff rate is 340 EUR/MWh:
340 – 150 = 190; 190×0.9 = 171 EUR/MWh compensated by the state (90% compensation above 150 EUR/MWh);
150 – 68 = 82; 82×0.5 = 41 EUR/MWh compensated by the state (50% compensation between 68 and 150 EUR/MWh);
171 + 41 = 212 EUR/MWh (total compensation from the state);
340 – 212 = 128 EUR/MWh (end user’s tariff fee).
Support will be provided to households automatically. The period of support will range from 1 October 2022 until 30 April 2023. This support will require funding of EUR 87 million.
The second support measure for households will be in the form of a single gas price cap.
For households the natural gas price will be set close to the regulated natural gas price – 108.7 EUR/MWh.
The difference between the market price and 108.7 EUR/MWh will be covered by the state compensation. Support will be provided to households automatically – the compensation will be transferred to natural gas traders. The support period will be between 1 October 2022 and 30 April 2023. This support will require funding of EUR 10.89 million.
The third support package is intended to compensate the electricity price rise for households –
all households will be applied with a fixed amount of 160 EUR/MWh for the first 100 kWh every month. The state will compensate the remaining difference with the market price.
For electricity consumption above 100 kWh households will pay in accordance with the price stated in the contract with the electricity provider. If a household’s electricity consumption exceeds 500 kWh a month, the household will be provided with support for clients that use electricity for heating.
Support will be provided automatically – the compensation will be transferred to electricity providers. The support period will last between 1 October 2022 and 30 April 2023. This support will require funding of EUR 67 million.
The fourth support measure will apply to all legal persons – businesses, state and municipal institutions, education and healthcare institutions.
All legal persons will be provided with compensation from the state for cost increase of 50% above electricity price of 160 EUR/MWh.
Support will be provided to legal persons automatically – the compensation will be transferred to electricity providers. The support period will last between 1 October 2022 and 31 March 2023. The necessary funding to cover this support measure is EUR 257 million.
Electricity providers divide their clients into two categories – households provided with electricity at a tariff for households and legal persons provided with electricity at a tariff for legal persons. The latter applies to all legal persons (including state and municipal institutions).
The new support will not overlap with support intended for energy-intensive industrial companies.
The State Construction Control Bureau of Latvia will be in charge of all administrative procedures associated with new support measures. More information about aforementioned amendments can be found at Latvia’s legislative acts portal.