Czech Businesses Concerned about Rising Energy Costs

Czech businesses are expressing concerns about the potential increase in energy prices and its impact on the country’s competitiveness. Representatives of the most significant business associations understand the government’s efforts to improve public finances; however, they warn that the planned resumption of payments for green energy in January, coupled with an increased share of the costs to be borne by companies, may weaken the competitiveness of the domestic industry and fuel inflation.

The government’s proposal, which is set to be approved on Wednesday, suggests that households and businesses will have to pay over 26 billion Czech crowns for renewable energy fees next year. According to Bohuslav Čížek, Director of the Economic Policy Section at the Confederation of Industry and Transport, if energy prices for the Czech Republic, as the most industrialized country in Europe, rise above the European average, it will negatively affect competitiveness.

The government’s proposals from the Ministry of Industry and Trade constantly change, causing a lack of predictability and certainty for the industry and households. The previous proposal aimed to cover the entire portion of renewable energy sources from the budget, but the current amount is 26 billion Czech crowns lower. This situation does not provide stability and confidence for the industry and households.

The issue of energy costs was discussed during a tripartite meeting on Monday, where the government promised further consideration of the matter. Failure to take action could result in a significant year-on-year increase in regulated components of electricity prices for specific customers, potentially reaching hundreds of percentages.

Lenka Janáková, Director of the Legislative, Legal, and Analysis Department at the Chamber of Commerce, emphasizes the need for reliable predictability of government measures to allow businesses to make informed management decisions regarding ensuring accessible energy for their operations. While understanding the government’s efforts to improve public finances, businesses, especially those in energy-intensive industries and those with continuous operations, need a comprehensive resolution and financial coverage of the regulated portion of energy prices.

The government previously covered payments for green energy from the state budget since October of last year. Although this measure was initially set to expire at the end of this year, Minister of Industry Jozef Síkela (STAN) proposed an extension due to concerns about potential price increases. However, Zbyněk Stanjura, head of the state treasury (ODS), opposed the extension and, in addition, suggested transferring a portion of the costs associated with supporting renewable sources from the state to businesses.

Experts predict that the price of electricity will decrease over the next two years, while issues with gas prices are not anticipated. However, companies are expected to pay the same fee per megawatt-hour as households, although before the exemption last year, they paid half the amount. The return of payments for green energy for homes, generated from sources such as solar, water, wind, or biomass, will result in an additional cost of approximately 1,800 Czech crowns per year on electricity bills for an average consumption level.

The government is expected to decide on renewable energy fees on Wednesday, as it also approves the state budget for the upcoming year. The Ministry of Finance has proposed a budget with a deficit of 252 billion Czech crowns. The most significant expenditures, over 926 billion crowns, are allocated to the Ministry of Labor and Social Affairs. The education sector is expected to manage a budget of 253 billion crowns, while defense will receive over 151 billion crowns.

The government’s financial package measures, aimed at improving public finances, will be finalized by the Chamber of Deputies on Wednesday. Business and labor union representatives jointly requested nine changes to the proposed measures, mainly related to tax changes, and were partially successful with three of them. They also sought to maintain tax benefits for employee benefits. The coalition agreed to exempt benefits from taxation up to half the average wage, with a limit of 21,983 Czech crowns for the following year.

Trade union leaders criticize the planned budget for reducing public sector employees’ salaries by two percent compared to this year. Employers argue that strategic investments and more significant support for innovation are needed.