Giving Hungary’s energy regulatory authority greater political independence and improving investment certainty are recommendations recently published by the European Commission’s report on Hungary’s energy sector. Identified in the report are Hungary’s regional integration and consumer dissatisfaction with gas suppliers.
Contributors to the report, including analysis on Hungary, are Michael LaBelle, an Assistant Professor at Central European University, CEU Business School and Department of Environmental Sciences and Policy, and Andras Deak, Research Fellow at the Institute of World Economics of the Hungarian Academy of Sciences. Working with energy consultancy AF for the European Commission, the overall report provides a snapshot and recommendation for each EU member state.
The 2014 report found overall improvement in the EU’s energy infrastructure and market. Consumers in some markets have more choices for electricity and gas suppliers, cross-border trading increased and wholesale electricity prices declined by one-third and gas prices were stable between 2008 and 2012. Suggestions included more substantial regional cooperation, use of smart meters and linking more closely wholesale and retail pricing – so lower wholesale prices translate into lower retail prices.
The report on Hungary included the progress made linking Hungary’s electricity market to the Czech Republic and Slovakia. This increased the amount of electricity available on all these markets creating regional price convergence. The report also noted that Hungarian gas consumers are the least satisfied in the EU.
Deterioration in the regulatory environment and notably the powers of Hungarian Energy and Public Utility Regulatory Authority were identified as problematic areas. Actions by the Hungarian government during the reports timeline of 2012- to early 2014 noted the removal important independent functions of the energy regulatory of network tariff setting authority. These political actions resulted in the reduction of energy prices by 20% (subsequently more since the completion of the report). The appeals process against the authorities decisions was also altered removing Hungary’s courts from providing sector oversight. Overall, the report identifies actions by the Hungarian state of increasing its ownership while investor owned utilities lost money and were dissuaded from investing in the sector.