Heat prices to go up due to carbon credits, VAT, coal next year

Prague, Sept 24 (CTK) - Heating plants will be raising prices again as of next year as they will include into their costs the purchase of carbon credits and the growth in other fees for atmospheric pollution, Association for District Heating of the Czech Republic director Martin Hajek told CTK Monday.

Coal prices will probably increase as well. Households' costs of heating will thus rise by hundreds of crowns a year depending on the region, he added.

Heating plants have to start buying carbon credits as of next year. However, they will still get most of the carbon credits for free in 2013 so that the growth in this cost would not be so dramatic. The number of the free carbon credits will be gradually lowered and in 2027, heating plants should already pay for all the carbon credits they need.

"The impact will be bigger on heating plants burning coal because its burning is linked with higher carbon dioxide emissions than is the case of natural gas," Hajek noted.

The price of carbon credits for next year has not yet been set. In the past year, the price decreased to EUR7 - EUR8 apiece due to the economic crisis. The EU considers an intervention into the carbon credit market to raise the price. Heating plants will also have to pay higher fees for atmospheric pollution as of January.

"Some heating plants will already next year be starting projects to meet tougher environmental limits after the year 2016. These costs will gradually be reflected in heat prices as well," Hajek added.

VAT on heat is to increase from the current 14 to 15 percent next year if the Chamber of Deputies approves this proposal.

Coal prices will be yet another important item. Heating plants need to negotiate new contracts for coal supplies but mining companies, in particular the Czech Coal group, want a drastic price increase. All these issues should be clearer at the end of October, Hajek remarked.

Heat prices next year will differ in particular depending on the type of fuel, said analyst Petr Hlinomaz of the firm BH Securities.

In contrast to coal heating plants, he does not expect a too high price increase by gas heating plants. Average increase in heat price next year could move between 5 and 15 percent, Hlinomaz estimated.

Heating plants started the heating season last week when average daily temperatures began to fall below 13 degrees Celsius. Heat consumption this year grew by some 8 percent against last year, according to the association's estimates.

Some 1.5 million Czech households use heat from coal heating plants and the prices grew regularly by hundreds of crowns in the last few years.

Roughly the same number of homes use gas for heating. Gas prices went up notably last year and this year have been mostly stable thus far.

Around 300,000 households use electricity for heating. The number of households using wood was rising in the last few years and now some 300,000 homes use wood for heating. On the other hand, the number of people using coal stoves is falling.