Thursday, June 18, 2009

No Pain Today, No Pain for Tommorow's Gas

Covering your financial shortfalls with a loan, or with your credit card, or to make you more popular is a trick that even households use. The government of Hungary in the fall of 2008 deferred raising the gas price to reflect the international rise in price. This resulted in E.ON striking an agreement with the government that the price difference would be paid back in the future on loan-like terms. Well the bill has come due, and the overall price has dropped. While I pointed out earlier Romania has dropped their gas prices by 33%, Hungary says it will drop gas prices but it will also be placing a special charge on gas to cover the repayment, as reported by IntelliNews - Hungary Today .

The government continued to plan a reduction of retail gas prices from the beginning of October, the state secretary of the energy ministry, Lajos Olah, announced. He pointed out that these plans should not be affected by the commitment to compensate gas utility E.On. The volume of the compensation amounted to HUF 60bn (EUR 215.2mn) and should be made till the end of 2010. Financing of the payment would come from a special item in the gas price but Olah reiterated that this special item would not put pressure on gas prices since it would be offset by an import price-correcting factor.

What can be learned from this? Sometimes you get lucky, if the price of gas had not fallen then consumers would have been stuck with an even higher bill, but in this case, a few million euros worth of a 'loan' forced on a company have paid off. If consumer's bills don't increase, they won't notice that -again- they are paying more than they should.