Hungarian residential customers have been enjoying decreased energy and public utility prices since 2013, as the end prices of electricity and natural gas universal service, district heating, water utility, chimney sweeping, and waste management services have been gradually decreased by law in Hungary. To ensure that customers are actually able to reap the benefit of these price cuts, new consumer protection rules have been implemented. There are plans to extend the price cuts to a certain extent to industrial customers as well.
The Hungarian State recently acquired ownership interests in several Hungarian natural gas companies. Since 2013, when MVM, the fully state-owned energy holding company, acquired a significant part of the natural gas business of the Hungarian subsidiaries of the German E.ON group, the State, already an important market player in the Hungarian electricity market, has established itself as one in the natural gas market as well.
The newly acquired natural gas portfolio consists of a major natural gas trading company and a natural gas storage operator. The major long-term natural gas import contracts involving the channeling of natural gas from Russia’s Gazprom belong to the now state-owned natural gas trading company, which supplies natural gas to other natural gas traders, universal service providers, power plants, and industrial customers, thus covering a significant part of the Hungarian wholesale and retail natural gas market.
The other part of the newly acquired natural gas business consists of four underground natural gas storage facilities located in Hungary, which are used for commercial purposes.
Subsequently, the State acquired a stake in MMBF, another Hungarian natural gas storage operator. As a result of this acquisition, the State is now the majority owner of the so-called “strategic” natural gas storage, which is intended to supply natural gas to residential household and certain public customers in the event of a natural gas crisis. The majority stake in the strategic storage operator was acquired from Hungary’s MOL, and the State became co-owner alongside the Hungarian Hydrocarbon Stockpiling Association, which is responsible for managing natural gas in the strategic storage.
For regulatory reasons, the strategic storage operator belongs to the state-owned MFB Hungarian Development Bank. MFB will also become the majority owner of FOGAZ, enabling the Hungarian State to enter into the natural gas universal-service market and to supply natural gas to residential household customers and certain non-residentialhousehold customers with lower consumption. In addition, the territorial scope of FOGAZ’s universal service license will be extended to the entire country, making it possible for the State to provide natural gas universal-supply services to all eligible Hungarian customers.
In addition to this series of acquisitions, the Hungarian Government laid down by resolution the foundation of a new state-owned public utility service system in Hungary, the framework of which includes the provision of natural gas, electricity, and district heating supply services by the State on market terms and measures to ensure sustainable operation in the long term. ENKSZ Elso Nemzeti Kozszolgaltato Zrt., the new state-owned company to be incorporated in early 2015, will be responsible for implementing this public utility service system.
With the above-mentioned acquisition of FOGAZ, which holds a natural gas universal service license, the establishment of the public utility service system in the field of natural gas supply is ahead of the electricity and district heating seg ments, since the review of the conditions of the State’s entry into the electricity universal-service and district-heating markets is expected by mid-2015.
For more information please contact Kristóf Ferenczi, Partner and Head of Kinstellar's Energy practice, at +36 1 428 4471, or .
This article was originally published in the February 2015 issue of the CEE Legal Matters magazine.