Poland will not avoid electricity tariff liberalization. Introduction of an energy supplement as a way to protect vulnerable consumers

According to PKEE analyses, it is possible to carry out the process of releasing energy tariffs for households in a way that will not lead to unjustified increases in electricity prices for this group of end users of electricity.

Increase in the price of carbon dioxide emission allowances (resulting from the European Union's tightening climate policy) This is causing an increase in the cost of electricity generation and, consequently, an increase in energy bills in the EU Member States, including Poland. At the same time, due to rising gas and coal prices, the costs of heating are increasing, which together may lead to an increase in energy poverty. Taking into account new declarations and plans of the European Commission in the field of legislation, is to be expected further increase in energy prices in the EU. Analyses show that tariff unbundling, coupled with appropriate tools social policy (e.g. an energy supplement) can contribute to a fairer and more stable distribution of energy costs, so that real help is given to those most in need.

The current system of electricity tariffs for households financially supports all electricity consumers, regardless of their income, including the wealthiest. Changing the tariff model in Poland by abolishing tariffs for households (the so-called G tariff group) should be combined with the introduction of an energy supplement for the most vulnerable energy consumers, for whom covering the costs of electricity and heat is a challenge and a great financial effort. In this way, those most in need and most at risk of fuel poverty would receive real help.

Moreover, tariffs limit the competitiveness of offers on the energy market. The larger the share of consumers is subject to energy price regulation, the less opportunity there is for all energy trading companies to present attractive, competing offers. Nearly uniform rates for end customers in regulated tariff groups G1X practically eliminate the need to change suppliers between trading companies and inhibit customer activity in selecting the best offers for themselves.

The need to change the way electricity tariffs for individual customers are set in Poland is inevitable. It results from the already binding Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity. The deadline for transposing this EU Directive into national law was 31 December 2020. Poland is one of the last countries in the EU where the vast majority of households benefit from tariffed electricity prices. While the document requires all EU Member States to ensure that energy retailers are free to set electricity prices and, at the same time, excludes the possibility of public intervention in setting energy prices, it does leave open the possibility for Member States to introduce social policy tools for those customers suffering from energy poverty or for households classified as vulnerable customers. In the opinion of PKEE, the change of the tariffing model in Poland, as required by the EU law, should be made with the use of an instrument protecting sensitive consumers, i.e. the poorest persons, pensioners and persons with disabilities.

The vast majority of EU countries have already implemented the Directive. The end of tariffs should not have a negative impact on households and does not necessarily imply an increase in energy prices or energy povertyThe Group's operations in Poland are very competitive, among others due to the already high level of competition on the Polish market. This is also confirmed by the examples of other European countries that have moved away from tariffsThe most important are the following: Bulgaria, Cyprus, Portugal, Romania, Latvia or the United Kingdom.

It is worth noting that along with the development of the energy market, popularization of distributed energy or implementation of smart metering - the energy market is growing. More and more countries in Europe are moving away from the energy tariff model. In some of these countries, protection of vulnerable customers is achieved through alternative instruments, such as energy allowances and subsidies and social assistance measures. Experience in these countries shows that In the long run, the abandonment of tariffs does not lead to a permanent increase in electricity prices; on the contrary, it allows prices to be stabilised by market mechanisms and has a significant impact on reducing the scale of energy poverty.

It should be noted that in Poland existing national regulations already include tools for the protection of the poorest consumers by the state. At present, there is an energy allowance which is granted to people who need funds to pay their energy bills. According to PKEE, it is worth considering a relatively minor amendment to make these regulations more consistent with current social policy objectives of providing access to heating and electricity to all citizens. Tariff unbundling could therefore take place with the introduction of even more real and targeted aid measures in our country, aimed at the poorest and most vulnerable consumers to energy poverty.

Also, The problem of energy poverty should be viewed from the perspective of all energy carriers. Analyses indicate unequivocally that the lack of action to abolish the tariff model, which has been in force in Poland for many years, as early as 2022 will contribute to the deepening of the problem of energy poverty, inter alia due to the parallel increase in gas, coal and heating prices. Tariffs also limit the competitiveness of offers on the energy market. All indications are that the continuation of tariffs despite dynamic changes in the energy sector will contribute to the degradation of the electricity sales market in Poland by e.g. decreasing the attractiveness of sales offers, decreasing the number of customers switching suppliers, and lack of incentives to improve energy efficiency. In turn the use of energy sale prices below production costs will expose all energy companies in Poland to financial lossesThis will reduce investments of power companies, their expenditures on modernization, development and maintenance of infrastructure, which could consequently threaten the stability of electricity supply to end users.

Full liberalisation of the electricity market through statutory exemption of all traders from the obligation to approve tariffs for all consumers will increase market competition, make offers more flexible and create an opportunity for new sellers to emerge. Exemption from tariffs allows consumers to prepare gradually for future changes in the energy market (e.g. allowing the use of dynamic tariffs) and to make appropriate investment and purchase decisions based on price signals from an efficiently operating market. This change could also increase interest in energy production in micro-installations and increase the number of prosumers.

It is worth reminding that at the end of 2023, gas prices in the household segment will be exempt from tariffs. This deadline results from the proceedings before the CJEU. In the event of electricity price liberalisation, it would be worthwhile for Poland to implement solutions compliant with the EU Directive (the transposition deadline for which has already passed) as soon as possible, while at the same time making this change in a fully controlled manner at the national level, taking into account national specifics and ensuring appropriate tools to protect the poorest and most vulnerable energy consumers.