Price conflict no gas for state-owned monopoly

The conflict between natural gas monopolist Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) and Poland's energy watchdog over who should bear the burden of gas price hikes - consumers or taxpayers - looks set to continue into the new year.

After a decision in mid-October by the Energy Regulation Authority (URE) preventing PGNiG from raising gas prices for end users next year, the gas giant recently took the watchdog to court. State-owned PGNiG, which is looking for more flexibility in setting prices, alleges that it should not have to pay proportionally more than it already does for domestically consumed gas. Rather, price increases should be passed onto consumers as in liberalized markets. For its part, URE said PGNiG's inefficiencies have resulted in higher costs that the company wants to shift on to consumers. It also claims PGNiG is abusing its market dominance.

"URE must balance between the needs of business and society," said Olgierd Szłapczyński, head of URE's information office. "A poor society like Poland cannot afford such price increases." He said PGNiG's failure to disclose data on gas transmission costs has made it impossible to calculate whether PGNiG's proposed price increases are justified.

URE decides on price hikes for end users every March, but for the past few years government fears of energy-fueled spikes in inflation have limited increases. As a result, this reluctance to allow prices to rise has stymied the search for solutions that might otherwise loosen PGNiG's grip on the market, analysts said.

Although PGNiG's suit is set to be heard by the anti-monopoly court this month, a resolution may take until March when the next round of annual tariff applications are due. "The court process will take quite some time, but in the meantime PGNiG can always resubmit its tariff application," Szłapczyński said.

PGNiG asked in September to raise gas prices for end users by 23.5% or 27.6%, depending on the type of gas consumed. When this was turned down by URE, PGNiG prepared a new project in which it reduced the increases to households to 19.8%. URE also rejected this, saying the proposed increase went against the 1997 energy law, which rules that gas price rises can only be a few percent higher than the annual rate of inflation, now expected to come in at less than 6% this year.

PGNiG has been calling for the introduction of new rules governing the frequency and elasticity of tariff applications to make domestic prices more strongly reflect import prices. "What we have proposed is fair to our customers," said Igor Wasilewski, PGNiG's press spokesman. "The rise for most end users would be no more than the price of one extra newspaper every month. Customers would be on our side."

Joe Harper