Under heavy pressure from the Parliamentary group of the Hungarian Socialist Party (MSZP), the government last week announced a new electricity price scheme that introduces special tariffs for the poor and hikes prices for corporate customers and well-to-do residential users.

Prime Minister Ferenc Gyurcsány gave a difficult task to Economy Minister János Kóka in January when he asked Kóka to come up with a new pricing regime that includes socially friendly tariffs and is not expected to burden the tight central budget.

The resulting pricing regime includes cross-financing between the various consumer groups, favoring the needy, while collecting the necessary extra revenues from more well-off groups. According to the new rule, electricity prices will increase 4.3% in 2005 for customers using less than 1,320 kilowatts a month.
For customers using more than 1,320 kilowatts a month, the price of electricity above the 1,320-kilowatt threshold will increase 6.8% – which equals the rate of inflation in 2004. Non-residential customers, mostly commercial users and institutions, will face a 12% increase of electricity prices – or close to three times the rate of inflation estimated for 2005. Groups not receiving subsidized prices will pay a total of HUF 8 billion–HUF 10 billion more than previously, according to estimates of the Hungarian Energy Office.

Non-residential users with large consumption can opt to buy electricity from the liberalized segment of the electricity market in order to lower their energy costs. However, free capacities have been bought mostly by large users such as chemical company BorsodChem Rt. and oil and gas company MOL Rt. soon after liberalization, leaving small room for other buyers on the market.