Poland to raise cap on power prices, cut subsidies costs

WARSAW (Reuters) -The maximum power price for Polish households will be set at 500 zlotys ($123) per megawatt-hour (MWh) for the second half of 2024, according to a draft bill posted on the government's website late on Tuesday, up from 412 zlotys per MWh currently.To mitigate the effects of the energy crisis Poland capped power prices for vulnerable consumers in 2022, while compensating utilities for the difference between the cap and higher market prices.With prices falling, the costs of support measures, will fall substantially as utilities have "ample room" to cut regulated prices, Climate Minister Paulina Hennig-Kloska said on Wednesday. The support system cost Poland 33 billion zloty ($8.1 billion) in 2023, she said.Energy prices have been the key element of uncertainty in inflation projections in Poland after a drop in overall price growth to 2.0% in March from a peak of 18.4% in February 2023. Economists expect inflation will rise again as support measures will be softened, but uncertainty over energy prices has made the scale of the rebound hard to predict.

This uncertainty has led the central bank to take a cautious approach on monetary policy, and its key interest rate has been on hold at 5.75% since October.

"Moving away from support for consumers of electricity, gas, and heat must be implemented gradually, taking into account primarily the situation of households that are most affected by the increase in bills for these utilities," the draft bill said.

It said that, in addition to the new regulated level for energy prices, a new "energy voucher" would be introduced.

"The energy voucher will be a cash benefit for households whose income does not exceed 2,500 zlotys ($614) per person in a single-person household or 1,700 per person in a multi-person household," the draft bill said.

ING analysts said they expected the price increase would mean household energy bills would rise by about 13%, adding 0.6 percentage points to inflation.

"At this stage, the project is still general, but it confirms our previous expectations that there will be no sudden increase in energy prices for households in 2H24," ING said in a note.

($1 = 4.0721 zlotys)

(Reporting by Alan Charlish, Pawel Florkiewicz and Marek Strzelecki; Editing by Mark Potter and David Evans)