Government axes natural gas network connection fee through to March

Gas meter (picture is illustrative).
Gas meter (picture is illustrative). Source: ERR

The gas distributor network fee to consumers is to be struck off altogether through to at least the end of March, the government announced on Monday. The measure joins a similar one already applied to the electricity network charge (which has been reduced by 50 percent) amid soaring energy prices in recent weeks. The government also set the threshold monthly household income at €1,125 – below this level, households also qualify for bill payment support for gas, electricity and heating bills.

Public administration minister Jaak Aab (Center) said: "We have offered a number of measures to the coalition partner and some have been implemented.

"Today, we also agreed on the exact possible measure for the subsidies paid to people through local governments for specific bills as well as on lowering the gas network fee," Aab continued.

The gas network fee will most likely already be at zero for December's bills – which will hit consumers a month later – Aab added, and will stay the same through to the end of March.

"The impact of this is about over 10 percent for household customers and seven percent for businesses. These are average figures, each bill is very different," he went on.

The measure follows an earlier decision to cut the electricity network fee in half, applied retrospectively from October.

The zero rate will cost the state €24.5 million, Aab added, while the funding will come from a set-aside government reserve will be utilized in the next few days, and pertains to around 60,000 gas points of consumption, 90 percent of them belonging to business customers.

The cost mainly covers subsidizing gas suppliers for the lost income, since customers will not be paying any connection fee.

As for the bill payment support, this will cost the state around €80 million, he added.

As with the electricity support measure, these funds will derive from CO2 quota sales, Aab went on.

Cutting VAT on energy, the third proposed measure to be discussed, remains off the table due to opposition from Center's coalition partner, Reform, Aab said.

The €1,125 threshold was based on the take-home monthly pay of the primary wage-earner, and applies to gas, electricity and district heating bills. Subsequent members of a household are added in on the basis of a 0.5 multiplier for those over 14, 0.3 in the case of under 14s, while all told, up to 80 percent relief is viable.

Bills dating back to September can be presented retrospectively, while the measure will be implemented by local, rather than national, government.

The support measure may continue into April and May, i.e. beyond peak energy consumption season, depending on how state coffers are looking, Aab added, while the national government will foot the bill for the extra staff needed to be hired to process the work.

Electricity prices have fluctuated much in recent days, and reached an average of €469 per MWh – a record high – two weeks ago. On Tuesday, the average price on the NordPool market will be  €406.89 per MWh, up 50.8 percent from Monday's average. Natural gas, almost wholly supplied by Eesti Gaas, has been seeing record prices since autumn.

District heating refers to the centralized supply of hot water to apartment blocks, usually a by-product of power stations' functioning.

Setting the threshold to qualify for energy payment support had been the subject of much discussion in recent weeks, with a figure as high as €1,200 recently quoted by Center Party minister Taavi Aas, and as low as €1,052 by Reform's finance minister, Keit Pentus-Rosimannus.

Since the threshold was by some proposals based on the median, rather than mean wage, it would by definition have meant that half the population of Estonia was receiving energy bill support payments, had it been implemented.

The mean wage in Estonia was reported in August at over €1,500 per month – somewhat higher than the newly-implemented threshold.

Other concerns included resentment on the part of householders whose income per month was only marginally higher than the threshold – such consumers may in real terms still see far higher energy bills than their only slightly worse off neighbors.

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Editor: Andrew Whyte

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