By approving the amendments to the Law on Measures to Reduce the Extraordinary Increase in Energy Prices, on August 23 this year the government decided that from 1 October 2022 to 30 April 2023 legal persons will be fully compensated for the electricity system service fee, i.e. all system operators’ distribution and transmission tariff costs (including value added tax). The compensation will not apply to state and local government institutions and those legal persons, who are subject to the household tariff (for example, house managers). The amendments to the law should be approved by the Saeima.
The matters of competitiveness-enhancing measures in conditions of high inflation have been discussed on several occasions with major businesses and the largest organisations representing businesses. One of the proposals was the compensation of the electricity system operator’s distribution and transmission tariff this heating season, which accounts for about 10% of electricity costs for undertakings. Today the government supported this proposal, thus reducing the total cost of electricity for undertakings and other legal entities. It is important to add that this is only one of the planned measures to support undertakings, together with the compensation of the mandatory procurement component and the provision of grants to energy-intensive undertakings,” the Minister of Economics Ilze Indriksone emphasises.
Compensation for system service fees will take place using the same principle as this spring – the compensation to legal persons will be applied automatically to their bills. System operators (i.e. 10 distribution system operators and 1 transmission system operator) will submit an invoice to the State Construction Control Bureau, which will compensate the costs incurred by operators (the Ministry of Economics did that in spring).
The rapid increase in prices of energy sources is driven by the energy crisis in Europe, which started last year in autumn. The increase in energy prices, particularly gas and electricity prices, has been influenced by a number of factors, both on the supply (low water level in hydropower plants, weak electricity generation from alternative sources) and on the demand side (adverse weather conditions last year, growing economy and consumption growth), and the Russian aggression in Ukraine, which has significantly increased the tension in the market of energy sources in the world. According to the estimates of the Ministry of Economics, this year prices of electricity, natural gas, thermal and solid fuels in Latvia could together rise by approximately 39%, which will affect the overall level of consumer prices by 3.8 percentage points, while fuel prices in total could increase by 40% in 2022, which will affect the overall level of consumer prices by 2.7 percentage points.