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Shocked by Inflation, Poles Await Double-Digit Energy Price Rise

Poles are set to experience a severe shock when the energy regulator reveals how much they will pay for gas and power next year.

Shocked by Inflation, Poles Await Double-Digit Energy Price Rise
An employee places 500 zloty banknotes in a counting machine. (Photographer: Lukasz Sokol/Bloomberg)

Poles are set to experience a severe sticker shock on Friday when energy regulator reveals how much they will pay for gas and power next year.

The watchdog could increase gas prices for heating by as much as 40% and electricity bills by 20%, Radiozet.pl reported without saying where it got information. While the government will lower taxes on energy early next year to cushions the fallout, the rise in tariffs could further fuel inflation, already at more than two-decade high.

Surging consumer prices have angered the public, triggering pressure on the central bank to raise interest rates. The opposition has repeatedly blamed the government for allowing prices to spiral out of control. Prime Minister Mateusz Morawiecki said some responsibility lies with the European Union and its push toward cleaner energy sources.

“The regulator’s decision will be key for inflation trajectory,” said Marcin Mazurek, an economist at  MBank SA in Warsaw. “But it’s still not clear what the scale of the hikes is going to be.”

If electricity bills rise by more than 10% and gas price increases exceed 15% then the current consensus for 2022 inflation is too low, according to Mazurek. Economists surveyed by Bloomberg expect inflation to reach 5.6% next year. 

The energy regulator’s spokeswoman Agnieszka Glosniewska declined to comment on the scale of energy price increases reported in the media. The regulator hasn’t yet approved the tariffs and wants to announce the decision by Friday so that the price changes could come into effect from the beginning of 2022, according to its Twitter account.

Boon for Utilities

It’s still not clear whether the regulator will allow power prices, which account for about half of the total electricity bill, to rise by 20% or whether the entire bill will go up by that amount.

For Santander Bank Polska SA’s economist Piotr Bielski, the reported electricity price increase would meet market expectations as long as the hike refers only to a 20% increase in power prices. A jump in gap prices could “potentially be a shocker,” he said. “We assumed gas bills rising on average by 5% next year.”

While bad for consumers, the increases will be welcomed by utilities following the surge in power and gas prices this year. Electricity for 2022 is up more than 200% since Jan. 1, while gas contracts on the European markets jumped almost 600% amid supply cuts and recovering demand following the pandemic.

Poland’s largest power utility PGE SA gained 2.9% on Thursday, while Tauron Polska Energia SA and Enea SA rose 2.5% and 4.2% respectively, rebounding from a 21% decline in the WIG Energy index since Nov. 4.

“The potential increase in power bills by 20% is a positive information,” Ipopema Securities SA’s analyst Robert Maj said. “It seems that the worst-case scenario of hardly any hikes in power prices will not materialize.”

©2021 Bloomberg L.P.