Electric and gas bills expected to rise

Consumers will be paying more to heat homes this winter

Electricity and natural gas prices are expected to rise for both households and businesses in the Czech Republic.

Heating a family house with electricity will cost about Kč 3,000 to Kč 4,000 more this year than last year. Roughly Kč 1,000 more will have to be paid for regular electricity consumption in dwellings, according to daily Mladá fronta Dnes (MfD).

Natural gas prices are also expected to continue to increase after hitting a low at the start of 2016, daily Hospodářské noviny (HN) said.

A steady rise on the wholesale market is the reason for the hike in electricity prices. At the end of August, a one-megawatt hour of electricity was over 50 euros and continued to rise. At the beginning of last year, it cost 30 euros.

Experts see more increases in the future, and little hope of a drop back to previous levels, though there made be a slight market correction.

Because of the way traders buy and sell electricity, the increase is sometimes delayed for customers. Regulations also slow price growth.

Smaller electric companies are showing a larger increase in prices, according to MfD. Large companies such as ČEZ and E.ON have raised price on average 5 percent, while smaller companies have raised theirs up to 10 percent.

Still, experts point out that household electricity prices in the Czech Republic are low, compared to Western Europe.

One factor in the rise of electricity prices is a rise in the cost of coal, due to increases in fees to offset pollution, which has doubled since January. Demand for electricity has also gone up, while the supply has not kept pace.

Germany, for example, has shut down its nuclear reactors and many of its coal-fired plants as it transitions to cleaner energy.

Shifting from coal has put pressure on prices for natural gas as an alternative.

Jiří Gavor, director of the Association of Independent Energy Suppliers (ANDE) told MfD that people should not panic that prices will hit 60 euros per kilowatt hour. “I would rather believe in a correction or at least a slowdown in growth for the rest of the year,” Gavor said.

The heat wave over the summer increased energy demand due to air conditioning. At the same time, the lack of wind affected the output of electricity generating windmills. The drop in temperatures should reduce demand, and wind typically picks up in the fall.

Some experts recommend that consumers should look into long-term fixed-price contracts for electricity and gas, as prices are expected to rise in the long term. There is a risk, however, that if prices drop instead then the contracts could be disadvantageous. 

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