Gas and electricity price caps for large businesses from January: support conditions and limits

Pursuant to Government Decree No. 298/2022 Coll., the set prices will apply to electricity and gas supplies made in the period from 1 January 2023 to 31 December 2023.

To be able to apply the capped price for the supply of electricity or gas, it is necessary to provide a customer declaration according to the template and submit it to the supplier. Where a company declares that it also generates electricity from gas, it is obliged to complete an additional annex. The declaration must be delivered to the supplier no later than the end of the month preceding the month for which the capped prices are to be applied. Therefore, to benefit from the capped prices for February 2023, the customer declaration must be delivered to the supplier by the end of January. An exception applies for the capping of prices for January 2023: the customer declaration must be delivered to the supplier by 15 January 2023.

 

The maximum price applies to the supply of electricity to low-voltage points of consumption, and the supply of electricity at 80% of the highest monthly electricity consumption at high-voltage or very-high-voltage points of consumption.

For maximum gas prices, the gas price shall apply to 80% of the highest monthly gas consumption at points of consumption, excluding the supply of gas for electricity generation.

 

 

Limits for public aid

The application of capped prices is subject to public aid rules. The difference between the market price and the capped price will be considered an advance on public aid that will have to be verified ex post. Companies will benefit from the capped commodity prices immediately in the relevant month, but the total amount of aid will be limited by the maximum permissible property benefit.

 

If the property benefit exceeds the permissible level of public aid, the company will have to refund or reimburse the difference according to the amendment to the Energy Act.

Rules for determining the maximum permissible property benefit will be set by government decree, probably during January 2023. According to preliminary information, the principles will derive from the revised Temporary Crisis Framework (TCF) which we discussed in November 2022, and the period for assessing the received benefit will likely be a calendar quarter.

The TCF defines eligible costs for which public aid can be claimed as the increased cost of the purchased energy (electricity and gas), i.e., energy costs for the eligible period (February 2022 - December 2023) exceeding 1.5 times the energy costs for the reference period of 2021.

The TCF also sets a basic limit on total aid, which must include not only aid obtained by using the capped prices in 2023 but also aid received from the High Energy Price Compensation programme announced by the Ministry of Industry and Trade in early November 2022 and drawn in the February to October 2022 period.

Total aid may not exceed 50% of eligible costs, up to a maximum of EUR 4 million per company (or group of related companies at the EEA level). However, subject to the additional conditions set out in point 67 of the TCF, these limits may be overridden if the following conditions are met:

Moreover, in the above cases, EBITDA (including total aid) for the eligible period may not exceed 70% of EBITDA reported in the reference period and originally negative EBITDA may not raise above 0 in the eligible period. 

 

 

Recommendation: First, evaluate criteria and conditions for support!

Although the general price capping appears to be a simple mechanism, it will be nonetheless crucial to evaluate and continuously monitor the complex combination of conditions, limits, and methodologies set by both the government decree and the Temporary Crisis Framework, be it the limits for public aid or the conditions for the fulfilment of the eligible costs definition outlined above.

Businesses as well related entities should thus first assess the criteria and conditions for public aid. At the same time, they should assess the economic viability of using the capped prices compared to the current price setting for commodities to be purchased in 2023. And if they want to purchase energy at capped prices already for January, they must provide their declarations to suppliers by 15 January 2023.