Energy prices to increase as of January 1st

The prices of gas and electricity for Czech households are to increase as of January 1st - gas bills will be up by 5 percent, electricity will cost from 7 to 16 percent more, depending on the region. The varying prices of electricity in different parts of the country is caused by the discrepancies in the costs of delivery. Until now, with regulated prices, the costs were shared equally, but with plans to open-up the market, this will no longer be possible, and it is estimated that competition will eventually bring prices down. It will be a number of years yet before that happens, but the deregulation of prices is at least a step towards that goal. Olga Szantova asked Commerzbank's economic analyst Radomirs Jac, how he sees the planned increase of gas and electricity prices.

"This further deregulation of energy prices is in fact reasonable, because in the past, energy prices for families were partially subsidized and there are still discussions, whether we will see some further increase in energy prices in the future. In fact, the prevailing opinion is that further increase of energy prices will not be drastic. It will rather follow the development of world prices of energy. In the future the development should not be affected by de-regulations as we saw in previous years and as we will also see in January next year."

This increase in the price of electricity and gas, what will it mean for the Czech family?

"It is estimated that in average it will increase the cost of energy for Czech families roughly by one hundred crowns per month. In my opinion such an increase is definitely not drastic and in fact, if we compare the pace of increase in energy prices with the dynamics we saw in previous years, we can say that the increase scheduled for January 2002 is lower than previous years."

So, what percentage of the family expenditures go towards gas and electricity?

"Very roughly we can say that some ten percent of the average household expenditure is spent on energy, including electricity, gas and other sources of energy."

So, that's what it's going to do to the family. What is it going to mean for the state, for the Czech national economy?

"If we take all this de-regulation in energy prices planned for January next year, it is estimated that it will add to the monthly inflation roughly half a percentage point, which is lower than impacts seen in previous years. So, in other words, because of the slower pace of de-regulation of energy prices we can expect that year on year inflation will tend to decline in January next year."