In the next heating season the tariffs of approximately 60% of heating energy traders will range between 80 and 130 EUR/MWh, according to representatives of the Public Utilities Commission (SPRK).
The commission explains that when compared with the previous heating season, heating energy tariffs in Latvia will be lower this season.
At the same time, it is important to keep in mind that in the previous heating season there were two tariff thresholds (68 EUR/MWh and 150 EUR/MWh) above which households were provided with state benefits.
Currently SPRK can see that approximately one-third of heating energy companies regulated by SPRK have reviewed and reduced tariffs to levels below 150 EUR/MWh.
Tariffs of approximately 60% of businesses range between 80 and 130 EUR/MWh, which is significantly below the level of the previous heating season.
The differences between tariffs are down as well.
Fuel (gas and wood chips) price trends suggest residents can also expect a slight tariff drop in the coming months. Most heating supply businesses have a duty to submit reduced tariff plans to SPRK once fuel prices go down. Even if this duty is not set up, fuel prices are still assessed at the next review of heating tariffs.
At the same time, although heating tariffs are going down thanks to fuel price drops at the moment, they will not reach the level observed in 2021. Although fuel costs compose the largest portion of heating tariffs, there is a slight increase observed for other costs, which is related to the general price growth in the country. Respectively, all this impacts heating energy supply service costs.
SPRK notes that a large number of tariff projects are under assessment for the next heating season. Generally, when compared with previous years, heating energy generation costs have increased slightly across all heating energy tariff-forming positions. The costs of fuel and electricity are down after a price surge last year. Depending on the time of procurement and supply location, the price of wood chips ranges between 22 and 30 EUR/MWh.
Compared with the previous year, the procurement price of wood chips is 30% lower. Natural gas is several times cheaper on the exchange. Although the market is cautious in its future outlooks, it is not expected for the price of wood chips to go up this autumn. Lumber prices are down. This autumn it is possible logging volumes will increase due to efforts to combat the bark beetle infestation. This will increase supply of wood chips to the market.
The price of natural gas on the exchange is also down when compared with the previous heating season,
and with China’s economic growth slowed, there is no increase in global demand for gas expected, which reduces the gas price on the exchange as well. At the same time, European gas storage facilities are more than 80% full, which also reduces the risk of gas prices going up. Generally SPRK concludes that prices of gas, wood chips and electricity have stabilised at the moment.
There are also businesses for which SPRK performs a full tariff project evaluation, cost assessment included. Once costs change for the existing tariff or heating energy volume either go up or down by more than 10%, heating traders are to submit to SPRK a tariff project with a full cost assessment.
SPRK explains there are still traders whose tariffs have not been reviewed in years. Those tariffs are relatively low. Tariffs of these traders go up when new fuel supply contracts are signed, because the price of fuel in previous contracts was significantly below the new one.
SPRK has a total of 21 full heating tariff projects and nine businesses’ own heating supply tariff projects.
The regulator adds there are businesses that sign fuel supply contracts for six months in order to stabilise fuel supply prices for a longer period of time. There are also businesses that sign month-long contracts and look if fuel prices could down in a short-term perspective.
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