Ministry of Economics to hand the government three suggestions for support of households – Baltic News Network

Latvia’s Ministry of Economics will soon submit to the government three suggestions for support measures of households to help compensate electricity and heating prices, said the ministry’s deputy state secretary Edijs Šaicāns during a meeting of Saeima’s Sustainable Development Committee on Wednesday, September 21.

The first suggestion includes the differentiation of central heating support.

Šaicāns said the centralized heating tariff will definitely exceed 150 EUR/MWh this season. This is why the Ministry of Economics offers preserving the already approved support, under which the state will compensate 50% of the price that exceeds 68 EUR/MWh. The state would compensate 90% for parts that exceed 150 EUR/MWh.

He also said estimates show that this support measure would require EUR 87 million.

The ministry’s second suggestion is setting a price cap for natural gas prices.

Šaicāns explained that currently the regulated natural gas tariff is 107.34 EUR/MWh. However, the market price exceeds this threshold. The ministry’s suggestion provides for a natural gas price cap at 107.34 EUR/MWh, and the state would compensate traders the amount that exceeds this threshold.

This support measure would require an additional EUR 11 million, said Šaicāns.

The third suggestion is compensating electricity price rise for households.

The ministry’s state secretary said that Latvian households consume 150 kWh of electricity on average every month. However, most households consume about 100 kWh of electricity.

The ministry will suggest setting a fixed tariff for households for the first 100 kWh. This tariff is not to exceed 180 EUR/MWh. The state would compensate the remaining difference.

Šaicāns reported that this suggestion would require EUR 52.5 million during the heating season.

He predicted that the three support measures will be submitted to the government for review next week.

The Ministry of Economics continues working on support measures for small and medium-sized companies. However, this kind of support will be possible only if the European Commission reviews guidelines for support and makes them more flexible. The ministry suggests setting electricity prices for small and medium-sized companies at 180 EUR/MWh. In this case the state would compensate 50% of the price that exceeds the set threshold.

This support would require EUR 187.5 million, he reported.

Atis Zakatistovs, parliamentary secretary to the Ministry of Finance, said during the meeting of the committee that the ministry will look for funding once the aforementioned suggestions have been submitted and approved by the government.

Bank of Latvia Monetary Policy Department head Uldis Rutkaste said he has yet to study these proposals, but he does not have any major objections.

Rutkaste said there are almost no economists that approve of price caps as an instrument. However, what the suggestion from the Ministry of Economics includes is not a classic price cap, because the price would be limited only for the consumer, whereas suppliers would receive a full price from the state. Compensation of electricity prices will motivate households to save up energy and stay within 100 kWh a month.

He also said that by approving these support measures the intensity of support will increase, but in a crisis this support is not excessive. The general debt level is also on a rise. Nevertheless, Latvia’s debt level is one of the lowest in Europe. This means the increase will not be high.

Rutkaste stressed that support during a crisis can be provided at the expense of budget deficit growth. However, it is important to prevent this support from becoming a regular tool for covering needs.

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