«The growth of gas tariffs is a sufficiently big shock. Residents who use gas for heating will be in a critical situation, since for them the cost increase will be enormous and in some cases – excessive,» SEB Bank economist Dainis Gašpuitis told BNN, commenting on the consequences of gas tariff increase in the country.
He adds that «this could prove an unbearable burden for households that use gas stoves. Nevertheless, all this needs to be viewed in the context with general inflation trends.»
«Why does the situation seem so dire? Because other costs important to residents are also on a rise. This is especially true for food, fuel, electricity and other public utilities. Loan costs are also up, because interest rates are up. All this creates massive pressure on residents’ purchasing power, which will likely suffer a sharp down-slide in the coming quarters.
The peak could be observed at the end of Q1 2023, when the joint influence of bills will have fully accumulated,» the bank’s expert predicts.
According to him, «weather will dictate the severity of the situation. Respectively, the price is one thing and may be high, but if consumption is low, the end bill is manageable. If winter proves cold, consumption will be high, which will put further pressure on prices. We can therefore expect poor sentiment from residents this autumn. Purchasing power will suffer and consumption of entertainment, leisure and other less important goods and services will go down, because prices there will increase and mos residents will have to rethink their priorities.»
BNN previously reported that JSC Latvijas Gāze has plans to increase gas tariffs for households in July. Depending on consumption, households may see a tariff increase between 65.6% and 89.9%.
Read also: Latvijas Gāze to increase gas tariffs for households up to 89.9%
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.