«If Europe ceases using Russian gas or Russia stops supplying gas to Europe and/or Latvia fails to secure alternatives to Russian gas, the gas price for households will increase again next year,» BNN was told by Swedbank senior acting economist in Latvia Agnese Buceniece.
«But if these scenarios do not come true, we can expect the gas price to not increase much or even drop a bit,» the economist comments on tariff growth for households.
According to her, «natural gas price rise for households was expected, because this price was significantly behind the price we have this year, especially after Russia’s invasion of Ukraine, according to information from exchanges. Last week’s announced tariff increases that will come to force on 1 July was calculated at a gas price of 107.34 EUR/MWh. The gas price on the Dutch natural gas exchange was around 100 EUR/MWh and more during spring. Around the start of June it dropped below 90 EUR/MWh.»
«The price increase will be painful in July, especially for residents who live in homes that use gas for heating, more so if the house is not energy efficient and requires a large volume of gas to provide heat. For residents that use gas in small amounts, to cook food, for example, the increase of gas prices should not prove large – a couple of euros, even if the increase seems significant in percentage. Considering prices grow rapidly not only for gas but for other energy resources and food, households’ purchasing power suffers.
Inflation is high for everyone, but it is higher for less financially secure households,
because the costs for housing-related services and food compose a much larger proportion of expenses for them than for wealthier households.
Residents are able to reduce energy consumption by increasing the energy efficiency of their homes and transition to using alternative energy resources, as well as reduce expenses on non-essential goods and services,» explains Buceniece.
«However, residents with very low income have a very limited room to manoeuvre – for example, in 2020 more than a fifth of Latvia’s population was subjected to the risk of poverty. Last year nearly half of Latvia’s residents mentioned large or minor difficulties with making ends meet. Without state aid, paying for energy resources will prove a very large challenge for most residents. Currently, with the government working on different support mechanisms, it is clear part of energy resource price increase will be compensated for residents in the next heating season. For less wealthy residents the government may come up with additional benefits. These measures will help reduce the impact of price rise on residents’ purchasing power.»
BNN previously reported that JSC Latvijas Gāze plans to increase natural gas tariffs for households between 65.6% and 89.9% depending on consumption from 1 July onward.
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For households that consume up to 250 m3 a year, the differentiated end tariff with VAT and excise tax will increase by 65.7% – from 1.10209 EUR/m3 to 1.8252 EUR/m3. For households that consume 250 to 500 m3 of gas a year, the end tariff will increase by 74.7% – from 0.96649 EUR/m3 to 1.6896 EUR/m3.
At the same time, for households that consume 500 to 25 000 m3 of gas annually, the end tariff will increase by 89.9% – from 0.80405 EUR/m3 to 1.52715 EUR/m3.
The state could compensate half of heating, electricity and gas tariff increase next year, according to the report from the Ministry of Welfare.
The ministry also has plans to present a new type of benefit – automatic reduction of electricity bills for low-income households in which a single person’s income does not exceed EUR 743 and the income of other members of the households is under EUR 520.
It is planned that this benefit will be provided based on information from state registers and state information systems on households and their income.
The planned period for provision of this benefit will be October 2023 – April 2024.
To support the least protected groups of residents and help them cover public utility and other costs during the next heating season, the Ministry of Welfare proposes improving housing benefit to make sure more people can qualify. It is also proposed to introduce a single-time benefit for disabled persons and seniors.
The total cost of proposed benefits could range between EUR 450 million and Eur 468 million, according to the report.