Increased prices and relief measures in the Czech Republic

Following the recent market trend, prices in the Czech Republic have risen sharply for residential energy customers, with the most extreme increases taking place in natural gas market. More specifically, prices in Prague have increased by 8% and 42% for electricity and natural gas, respectively, since the previous month. The increase is even more noticeable when compared to November 2020 as in this case the average household pays 21% and 57% more.

This market development was only partly restrained by the recent measures taken to alleviate the customers. As an emergency aid, it was announced that in November and December 2021, electricity and gas will be exempted from value added tax (VAT), which used to be 21%. The government also decided that households (and other consumption points, such as cottages) will also be exempted from renewable surcharges.

The energy crisis has taken a toll on the suppliers too. Bohemia Energy, one of the biggest suppliers in the free market, has gone bust. About 900,000 affected customers have six months to choose a new contract, while in the meantime they are automatically assigned to the supplier of last resort (DPI), according to the distribution area they are located. Thus, it is ensured that no customers will be left without supply of energy and heating. However, this transition was not foreseen and DPIs had to buy gas on the wholesale market at currently high prices to satisfy the additional demand. As a result, former Bohemia Energy gas customers are estimated to be paying under DPI supply even six times the price they had contracted. The Energy Regulatory Office (ERO), after checking the suppliers’ calculations and margins confirmed that the high prices are an unavoidable consequence of the high prices in the wholesale market.

Czech households are expected to see further increases in their energy bills in 2022, as the ERO has announced increases in the regulated energy components – an average of 3.7% for electricity and 2.4% for gas. The largest suppliers have also announced increased rates for 2022, that almost double the current rates.

Author: Iliana Papamarkou, Data Analyst

Sources:

[1] penize.cz: “Úlevy kvůli zdražení energií. Stát odpustí DPH a poplatky”, published on 18.10.2021

[2] blesk.cz: “Velký přehled cen energií: Co bude se zákazníky zkrachovalé Bohemia Energy? Připlatí si až 6x”, published on 24.10.2021

[3] Seznam Zprávy: “Elektřina a plyn budou ještě dražší. Víc peněz bude stát i distribuce”, published on 01.12.2021