Hungary prepares to cut household utility rates for the 3rd time - Orbán

The government’s utility tariff mower seems to be working up an appetite as the cabinet is approaching the polls next spring. The last (second) utility price reduction took place on 1 November and rates are down almost 20% from a year earlier, with companies providing natural gas and electricity at cost. Political analysts say the reductions are working; Fidesz is gaining popularity among voters. The announcement is no surprise considering similar hints made leading government officials, saying a 30% rate reduction would be desired. Several analysts projected a third round of rate cuts for before the elections.

The cuts have also reduced inflation, which could spur much-needed household spending and boost the economy.The first two utility tariff cuts led to the redistribution of about HUF 100 bn each, of which HUF 40-40 bn were the share of electricity and gas service providers and cc. HUF 20 bn of the budget (VAT). The cabinet has never created or published impact studies, whereas the players of the sector have been warning that these measures create an unsustainable system and could lead to serious supply problems in the longer term.

The government has also made it clear that it would like the state to have a bigger share in energy service companies, while every utility rate reduction reduces the value of such utilities, which are dominated by foreign companies, including Germany’s E.ON and RWE. You connect the dots. These companies will have to bear the brunt of the cuts and several companies are already considering exit from Hungary because of the losses they are making as a result of these measures.Hungary could repurchase RWE's minority stake in Főgáz Zrt., which supplies natural gas to the capital Budapest, by the end of December, daily Magyar Nemzet quoted Főgáz Chief Executive László Koncz as saying on Monday.Fidesz party Vice Chairman Lajos Kósa was asked on 9 December whether they plan to cut household utilty rates for the third time and whether there will be an assistance programme for people holding foreign currency mortgages before the elections. To the former he replied: "our job is not done yet" and it needs to be monitored continuously how retail utility prices turn out.

As regards a relief package for FX debtors He said there will "definitely" be steps taken before the elections, local newswire MTI reported.

According to Reuters, Kósa noted measures will be taken "because this is not linked to the elections."

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