The statutory mechanism of approval of tariffs for households by the President of the Energy Regulatory Office is designed to protect consumers against energy price increases. The President of the ERO verifies that the proposed tariffs are based on the energy sellers' costs. This guarantees consumers that the tariffs are close to the actual cost of energy on the market. This is also what happened this year.

Fares

This year, energy sellers have applied for a reduction in the current electricity tariffs. By decision of the President of the ERO, they were reduced from the level of PLN 1.05-1.13/kWh net in 2023 to approximately PLN 0.74/kWh net in 2024. This reflects market trends. In 2023, the monthly average price of electricity with next year's supply on the wholesale market ranged from PLN 0.55/kWh to PLN 0.87/kWh. This is how much electricity retailers will have to pay for electricity contracted now that will be delivered to our homes in 2024.

Price freeze

It should be stressed that the reduction in tariffs will not mean a reduction in the price of electricity sold to end users. This year's record high tariffs were not felt by households thanks to a price freeze at the 2022 level, i.e. around PLN 0.41/kWh net.

The price freeze, which was supposed to operate until the end of 2023, has been extended until mid-2024. This means that most households will be paying the frozen current rate until the end of June. It is worth noting that it was approved by the ERO president two years ago, in December 2021, even before the outbreak of the full-scale war in Ukraine that shook the Polish and European energy market. The consumption limits for energy sold at a preferential price in force in 2023 will be halved for 2024, in proportion to the duration of the shielding measures - e.g. instead of the current limit of 3,000 kWh for 12 months, there will be a limit of 1,500 kWh for six months (until the end of June).

In practice, this will mean a slow adjustment of the prices paid by households to the market situation. Over the coming months, prices will not change; in the second quarter, those households exceeding the limit will pay the so-called maximum price, i.e. no more than PLN 0.69/kWh, and from July we will all pay the price approved by the President of the ERO, i.e. around PLN 0.74/kWh net, depending on which supplier we use.

However, the scale of the increases will not be as noticeable as it seems. In the bill of an average Polish family, the price of energy is about 50% in value. The remainder is energy distribution charges. Here, too, tariffs will increase, but to a lesser extent, by an average of 2.9 per cent. Therefore, an increase in the price of energy itself will not mean an increase in the bill to the same extent.

Situation on the energy market

Over the past year, the prices of energy commodities - coal and gas - on wholesale markets have stabilised. They are still higher than before Russia's aggression in Ukraine, but significantly lower than in 2022. Hence, year-on-year lower generation costs and lower prices on the wholesale market have given energy companies room to propose lower tariffs than last year.

However, the cost of power generation in Poland is still under pressure from the high cost of carbon emissions. Even before the outbreak of the war in Ukraine, they had risen from around EUR 20-30/tonne to around EUR 80/tonne in the space of several months and remain at this level today. This is particularly relevant for the Polish energy sector, which is still one of the most carbon-intensive in Europe.

Reducing the impact of these costs is necessary to maintain the competitiveness of the Polish economy and energy prices at an acceptable level. The only way forward here is to invest in new zero- and low-carbon capacities that are not burdened by the costs of purchasing allowances, or are burdened by them, but to a minimal extent. The development of renewable energy sources, including photovoltaics, offshore and onshore wind farms, the construction of nuclear power plants, energy storage facilities, the modernisation and expansion of transmission and distribution networks should be considered key here. According to EY analysts, who were commissioned by PKEE to prepare a report entitled 'Poland's Energy Transformation Path', the cost of the necessary actions until 2030 will amount to approximately PLN 600 billion.