On Thursday, the 23rd of November, the Latvian Saeima passed amendments to the Energy Costs Support Law. These amendments provide for compensating energy resource-related costs to households with low to medium-low income levels.
The parliament has also decided to limit maximum levels of electricity distribution tariff growth for a period of two years.
The goal of the new law passed in the final reading is “reducing the negative socioeconomic influence on residents’ welfare caused by the rapid rise of energy resource prices in the heating season”.
Around 40 – 50% of households in Latvia may be eligible for this support.
This support is not planned to be provided all the time throughout the entire heating season. Instead it will be provided in situations when emergency spikes of energy resource prices are observed at the exchange. This support will cover energy resources households receive through the centralised network – electricity, natural gas, heating energy, as well as certain decentralised heating solutions: firewood, granules, briquettes, diesel fuel.
Support for centralized energy resources will be applied by electricity and natural gas traders, as well as providers of district heating services. Decentralized users will be supported by municipalities. The support provided is intended to be compensated from the state budget, the Ministry of Climate and Energy explains.
From now on, households that qualify for support will be identified in the system. The system compiles information from databases maintained by the State Revenue Service, State Social Insurance and the Office of Citizenship and Migration Affairs.
Previously, at a meeting of the National Economy Committee, there were objections voiced that the state should not pay for municipalities’ main functions – provision of social support. The majority of Saeima deputies supported the proposal from Latvian Union of Local Governments: to establish in the law that a municipality in the administrative territory of which a low and medium-low-income household is located is delegated the task of the state administration to apply support to this household to reduce the fee for decentralized fuel consumed and electricity used for the production of thermal energy.
This proposal provides for the state to compensate energy supply merchants and municipalities with the total amount of support that energy supply merchants and municipalities applied to low and medium-low-income households during the relevant period.
The Union of Local Governments notes that in accordance with municipalities’ overall principles and the Law on Local Governments, by delegating the performance of a new task or function to local governments, the performance of which is associated with an increase in expenses, the state must provide the local government with the sources of financing necessary for the performance of this task.
Members of the committee supported the proposal from Jānis Vitenbergs, that the expenditure taken into account in determining whether a household qualifies for support includes the total expenditure of the household on the dwelling. Including expenses for rent, maintenance, utilities, and mortgage loan for the purchase, construction, repair of a home. However, the Saeima rejected this proposal.
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Additionally the Saeima passed in the final reading amendments to the Electricity Market Law, Energy Law and the Law on Regulators of Public Utilities, limiting the maximum amount of electricity distribution tariff increases for two years.
Existing regulations do not provide any ceiling for tariff growth. With the amendments, it is planned to set the ceiling for the increase of the fixed part of the electricity distribution tariff for all households with a single-phase connection and households with a three-phase connection – with a current size of 16, 20, 25 and 32 amperes from January next year until the 31st of December, 2025.
Representatives of the Ministry of Climate and Energy previously noted in the commission that currently more than 28,000 users have reviewed and adjusted the connection capacity according to their needs.
According to authors of the legislative draft, changes to the electricity distribution system service tariffs this summer helped underline a number of problems with existing regulations.
The rapid rise of tariffs caused a high drop of trust both in the service provider and the government, which is supposed to protect public interests.
Deputies also proposed making it a duty for system operators to include in their ten-year system development plans more information on the relevant industry, the future needs of users and tariff forecasts for system services.
In turn, the Public Utilities Commission will also have to determine the maximum level of deviation of tariff values in the tariff calculation methodology. The amendments will increase the availability of information to consumers and will apply to both electricity and natural gas system services.
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