Price Regulation as Response to Energy Crisis in Slovakia?

Energy markets are constantly facing unpredictable challenges. A long lasting Covid-19 pandemic, significant inflation at the beginning of 2022 and the military aggression by Russia against Ukraine resulted in an extremely adverse situation on the European market with energy commodities.

The distressed situation has initiated an extraordinary increase of prices for electricity and natural gas jeopardizing their affordability for all customers. Slovak government contemplates to deal with the burdensome circumstances primarily via price regulation. This is based on the idea that certain groups of customers shall be entitled to buy electricity and natural gas for regulated prices.

Price regulation shall newly apply also to some non-household customers, such as customers using electricity for operation of social services facilities or supply gas to owners in an apartment building (“vulnerable customers”).

The procedural rules were also adjusted in order to facilitate the protection of vulnerable customers. Such customers have the right to leave the regulated field (opt-out model) or to enter this field (opt-in model). The corresponding choice shall be made until 31 March of each calendar year in question and apply in 2023 for the first time. This mechanism shall secure parallel existence of regulated and non-regulated products for vulnerable customers and in the end contribute to a significant increase of the energy market flexibility.

There is no doubt that new price regulation will support the protection of customers and the affordability of natural gas and electricity. It is however important to mention that price regulation will significantly affect electricity and natural gas suppliers as well. These entities are usually exposed to high input costs, which might even worsen as compensation of such costs might be stricter until the end of the current crisis. Only practical application will prove the actual consequences of price regulation.

By JUDr. Zuzana Tužilová and Mgr. Renáta Konštiaková

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