Government Public Utility Fee Cuts

Summary

The Orbán government reduced the centrally regulated household price of electricity, gas and district heating by a total of 20 percent in 2013, first cutting fees for these public utilities by 10 percent via government decree on January 1 and then by a further 11.1 percent (to equal 20 percent over the entire year) via National Assembly law on November 1 (source in Hungarian). 

The National Assembly adopted legislation in the spring and early summer reducing centrally regulated fees for water, sewage, garbage collection and propane gas (LPG) by 10 percent as well on July 1 (source in Hungarian).

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Reestablishment of Centrally Regulated Prices for Household Gas and Electricity 

The FideszChristian Democratic People’s Party (KDNP)-controlled National Assembly adopted legislation in June 2010 restoring the central regulation of prices for household electricity and gas in Hungary (source in Hungarian). 

The previous Hungarian Socialist Party-led government had lifted the central regulation of household electricity and gas prices in 2007 and 2009, respectively, in accordance with the European Union principle of ensuring the free flow of capital, services and labor within and among member states (source in Hungarian). 

First Public Utility Fee Cut 

Prime Minister's Office officials Giró-Szász (left) and Lázár announce first round of public utility-fee cuts.

Prime Ministry officials Giró-Szász (left) and Lázár announce first round of public utility-fee cuts.

On November 30, 2012, Prime Minister Viktor Orbán said during an interview on state-run radio that “Public utilities are not there so people can make money from them—this sector does not belong to the world of profit” (source in Hungarian). 

On December 12, 2012, Fidesz Spokesman András Giró-Szász and Prime Ministry State Secretary János Lázár announced that the government had decided to cut the centrally regulated prices of gas, electricity and district heating by 10 percent on January 1, 2013 (source in Hungarian). On December 15, the National Development Ministry issued the decree stipulating these price reductions (source in Hungarian).  

Giró-Szász claimed when he made the announcement that the companies involved in the privatization of Hungary’s public-utility sector in 1995 had made annual profit of 20 percent. (The main companies operating on Hungary’s utility sector are German energy companies E.On, RWE and EnBW and French energy companies GDF Suez and Électricité de France.)  

Prime Minister Orbán said on December 21 that the government had decided to impose the 10 percent cuts on the household price of gas, electricity and district heating because it could not accept that “here the prices of public utilities are for all practical purposes the highest in Europe” (source in Hungarian).

Price of Gas and Electricity in Hungary prior to First Public Utility Fee Cut 

According to European Union data compiled using the Purchasing Power Standard enabling comparison of costs based on the relative purchasing power of various member-state currencies, household consumers in Hungary paid the third highest price for electricity and the ninth highest price for gas in the European Union when Prime Minister Orbán made the above statement in the second half of 2012 (source in English). The comparative price of both gas and electricity had, in fact, already fallen considerably in Hungary since the Orbán government came to power in May 2010: in the first half of the latter year consumers in Hungary paid the highest price for gas and the second highest price for electricity within the European Union (sources A and B in English). 

Transformation of Public Utility Providers into Non-Profit Companies 

E.On Ruhrgas: reducing stake in Hungary's gas and electricity market.

E.On Ruhrgas: reducing stake in Hungary’s gas and electricity market.

On March 28, 2013, the state-owned Hungarian Electricity Works (MVM) signed an agreement to purchase the Hungarian gas operations of German utilities company E.On for 870 million euros. Minister of Public Administration and Justic Tibor Navracsics said the previous summer that the planned state purchase of E.On’s Hungarian gas unit was part of the government’s plan to turn all public utility providers in Hungary into non-profit companies: “We would like to establish all public utilities on a non-profit basis. This step corresponds to this plan,” Navracsics stated (source in Hungarian). 

Fidesz National Assembly caucus Chairman Antal Rogán said on September 7, 2013 that the party was considering a law stipulating that public utility companies in Hungary must operate on a non-profit basis (source in Hungarian). 

Reduction of Water, Sewage, Garbage Collection and LPG Fees  

On April 29, 2013, the National Assembly passed a law reducing the household price of water, sewage and garbage collection by 10 percent. The National Assembly passed another law on June 3 reducing the price of propane gas (LPG) by 10 percent as well. These laws came into effect on July 1, 2013. 

Second Public Utility Fee Cut

On October 14, the National Assembly passed legislation reducing the household price of gas, electricity and district heating by a further 11.1 percent, thus resulting in 20 percent cuts in the cost of these public utilities for the entire year 2013. These price reductions went into effect on November 1. 

Government Advertising of Public Utility Fee Cuts  

Sign advertising government public utility-fee cuts.

Sign advertising government public utility-fee cuts.

The National Development Ministry issued a decree that went into effect on February 1, 2013 stipulating that all public utility bills had to display the amount of money saved as a result of the government’s utility-fee cuts in a field of orange, the party color of Fidesz (see Minus 20 Everywhere).  On December 12, 2013, Fidesz National Assembly representative responsible for public utility fee cuts Szilárd Németh announced that the National Consumer Protection Authority had fined seven utility companies a total of 56.5 million forints (EUR 185,000) for failing to follow the new bill format (source in Hungarian).  

On November 22, Németh submitted a bill to the National Assembly that would require an official notice informing residents of the precise sum of money that they have saved as a result of the government’s public utility-fee cuts for both the billing period and the entire year to be displayed in a visible place in every residential building containing privately owned apartments in Hungary (see Minus 20 Everywhere).

The government launched an extensive billboard-advertising campaign in the fall of 2013 to publicize the utility-fee cuts.

Government Defense of Public Utility Fee Cuts

Fidesz activists collect signatures in support of government public utility-fee cuts.

Fidesz activists collect signatures in support of government public utility-fee cuts.

In January 2013, gas and electricity companies operating in Hungary individually lodged legal challenges to the government’s 10 percent public utility fee reductions on the grounds that the Hungarian Energy Office’s calculation of the base for the cuts was invalid (source in Hungarian). Shortly after the Budapest Court of Justice issued a first-instance ruling in favor of gas companies that had challenged the utility-fee cuts (source in Hungarian), the Fidesz-Christian Democratic People’s Party-controlled National Assembly voted on March 14, 2013 to establish a new state office in place of the Hungarian Energy Office, called the Hungarian Energy and Public Utility Regulatory Authority, which it invested with the authority to issue decrees regarding energy prices that can only be contested in the Constitutional Court, not regular courts (source in Hungarian). This effectively put an end to the legal challenges to the government public utility cuts.  

On March 11, 2013, following the court ruling in favor of the gas companies, Fidesz started a national street-side and on-line campaign to collect signatures for a petition expressing support for the government public utility fee reductions under the title “Hungary Will Not Give In! (Magyarország Nem Hagyja Magát!) (source in Hungarian). Fidesz announced at the end of the campaign that the party had collected 2.3 million signatures in favor of the utility-fee cuts (source in Hungarian).  

On September 20, 2013, Fidesz National Assembly caucus Chairman Antal Rógan announced that the party intended to enact a sixth amendment elevating the government’s utility-fee cuts into the Fundamental Law (source in Hungarian).      

In early October 2013, reports emerged that the European Union had notified the Orbán government in August that it objected to some technical aspects of the public utility fee reductions, primarily those pertaining to network regulation, though not to the cuts themselves (source in Hungarian). In response to the European Union’s objections, Prime Minister Orbán proclaimed on September 15“Let there be no doubt in anybody’s mind that 2014 will be the year of the utility-fee struggle” (See The Ignoble Struggle). Orbán warned “The big foreign-owned energy-service providers and the political powers that stand behind them are going to stand up to oppose us. We must, however, once and for all put an end to the era in which energy-service providers could profiteer at our expense” (source in Hungarian).

On October 21, 2013, Fidesz-KDNP and Jobbik National Assembly representatives adopted the following “Political Declaration Against the Pressure of the European Union Bureaucracy against the Public Utility Fee Cuts” (source in Hungarian): 

State Purchase of Public Utility Companies

Following its purchase of E.On’s Hungarian gas-unit earlier in the year, the Hungarian Electricity Works (MVM) announced on December 9, 2013, that it would purchase the minority 49.8 percent stake that German electric-utility company RWE owns in Budapest gas company Főgáz before the end of the year. The city of Budapest owns the remaining 50.2 percent stake in the company (source in Hungarian). 

Third Round of Public Utility Fee Cuts

On January 25, 2014, Fidesz National Assembly caucus Chairman Antal Rogán announced that the government would submit a bill calling for the fee for household gas to be cut by a further 6.5 percent on April 1 (five days before the 2014 National Assembly election), the fee for household electricity to be cut by a further 5.7 percent on September 1 and the fee for district heating to be cut by a further 3.3 percent on October 1 (source in Hungarian). 

On January 26, 2014, Rural Development Ministry State Secretary Zoltán Illés announced that the cost of household waste collection could be cut by between 10 and 15 percent in the second half of the year (source in Hungarian).

 Last updated: June 11, 2016.

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