The Poles are outraged: they are saying: ‘we will have to spend the whole salary to pay electricity and gas bills after the increase of the tariffs’. Indeed, the country expects a sharp increase of gas utility tariffs in the next weeks, and the Poles are mad at their government because of it. Why has Poland started to feel the repercussions of terminating the gas contract with Russia just lately?
‘Millions of Polish families whose homes are connected to the gas network have already received ‘letters of fear’. This, without exaggeration, is the way to call these pay slips with new gas tariffs, which the Polish oil and gas utility PGNiG has sent their subscribers. PGNiG is Poland’s biggest gas provider. But its smaller competitors in the industry are keeping pace by promising to increase their tariffs too’, writes Onet.pl.
Indeed, from July 1, the gas rates in Poland will increase by 45 to 47 per cent depending on the tariff. But this will not be the only extra amount consumers will have to pay. Other levies, such as for gas distribution, network amortisation, etc., will also grow. The resulting increase in customers’ pay slips at the end of July compared to June will increase by 60 per cent.
‘What really happened? Why are prices skyrocketing? The reason is that the ‘freeze’ period will end on June 30. The tariffs remained flat for almost three years: this is how the authorities protected the Poles from the aftermaths of Covid-19 and the conflict in Ukraine. However, the government does not intend to keep these protective measures any longer. Today, they are discussing the adoption of ‘energy certificates’, which impoverished people and middle-income families will receive’, explains the outlet.
The root causes of the gas tariffs situation are not a secret. In 2022, Warsaw terminated the contract with Gazprom, and natural gas from other sources turned out to be not too cheap. To cap the social unrest, the Polish government ordered to sell electricity to people at rates lower than its production cost. The difference was compensated from the budget. As a result, Poland’s electricity and natural gas tariffs were among the lowest in the EU.
Yet, this did cost a bundle: the total cost of restricting and freezing electricity, gas and heating tariffs in 2022–2023 reached almost 100 billion zloty, or 23.4 billion euro. However, while the conservative Law and Justice party remained at the helm, Poland’s government allowed this money to be spent for a reason, remembering the forthcoming parliamentary elections scheduled for October 2023. Well, this populism did not help the Polish conservatives: L&J lost the election.
The new Polish government extended the freeze period just for the first half of 2024. Until today, consumers paid for electricity at the rates of December 2021. The next election is far away, so there is no need to pump money to win the electorate’s support so far. It would be better to have them pay the growing expenses, as the treasury and the utilities’ budgets are not without a limit at all.
So, ‘the freeze’ ends on June 30, the authorities are not going to cap prices any longer. ‘Obviously, they took this decision under the utilities’ pressure. Surely, the government does not have the resources to ensure sufficient subsidies’, notes Leonid Khazanov, an industrial expert.
He reminded that Poland’s sovereign debt broke the historical high reaching 361.3 billion US dollars (it was 225 billion 9 years ago). Poland’s budget deficit amounted to 5.1 per cent of GDP last year, with the EU’s 5 per cent cap limit. If the current gap is not addressed, the country might face penalties. In his turn, the leading analyst of the National Energy Security Fund Igor Yushkov states that Polish consumers will have to pay for the energy crisis of 2022–2023 by all means, although with a delay, and more tariff increases will follow.
Onet.pl talked to the Poles using gas from the network and from cylinders. Everyone is panicked. For example, the 74-year-old single Janina living in a place called Wieluń in Łódź province said she had a monthly pension of 1.7 thousand zloty (around 400 euro) and lives in a small house. She used to pay 800 zloty (~187 euro) in two winter months; and in summer, the bill was about 250 zloty (58 euro).
The elderly widow tearfully compares how good it was earlier with how bad it will get soon. ‘Everything was perfect at first. I didn’t have to go to the boiler room to stroke the boiler, didn’t need to buy coal and stash it in the cellar…
And now, when I received this paper with new tariffs, I almost cried. I won’t be able to afford to heat the house or cook soup twice a day. I will have to switch off heaters in the bathroom and living room and move to the kitchen’, complains Janina.
She did the math: if the gas price goes 50 per cent higher, she will have to pay 370–1,400 zloty per month (up to ~327 euro). ‘This just a cosmic amount for me. And how can I buy my pharmacies? And electricity, which also gets more expensive? Not to mention food? I will save as hard as I can’, concludes Janina swearing at the authorities.
Wladyslaw Michalski living in an apartment building in Zakopane could not but swear too. ‘It is known winters can be bad in Zakopane… To heat the apartment more or less, a ‘Junkers’ (this is how local people call a gas heater) must work almost non-stop. Already now, we pay around 800 zloty (~187 euro) to keep warm and to cook in winter. So, I just cannot imagine that the gas tariffs will increase when they are already so high. This will make people go broke’, says Michalski.
In his words, the extra 400 zloty he will get with ‘an energy certificate’ will be of little help to pay for gas and power. He is sorry he did not vote for the former ruling party Law and Justice last year. He believes it cared about people more than the Civic Coalition currently ruling in Poland.
In his turn, Petr from the Silesian place Żory pays from 130 to 150 zloty in his gas monthly pay slip. ‘Two years ago I used to pay 60 zloty for gas, not more. This sum has tripled in the recent years. But my salary has not increased like that’, he stresses.
Many of those used to using gas are looking for alternatives. David living in Nowy Targ in an old 110-sqm house shares it with other four persons in his family. They pay 1,500–1,800 zloty (up to 421 euro) every month.
‘These are big costs for us. My wife is a cashier earning around 3 thousand zloty net. When the tariffs increase, we will spend all her salary to pay electricity and gas bills. So, I am thinking of buying an old furnace somewhere, for the boiler room, which we haven’t used like for twenty years’, says David.
The Polish government is now trying to mitigate the price shock for people by reducing the impact of harmful emissions and commodity indices on the cost to produce electricity. To do this, the government intends to build windmills, develop renewables and invest in upgrading energy grids. But these measures are very costly too. ‘The construction of wind mills, production of solar panels will also drive tariffs up’, explains Yushkov. Indeed, looking at global practices, renewable energy tends to cost much than anything else in the end.
Today, many people in Poland cherish hopes for the national nuclear energy program widely promoted by the Polish authorities. However, the Polish Industry Minister Marzena Czarnecka has said lately that the first NPP in the country will be built not earlier than 2040. But before it happens, they’ll have to shell out hard to pay for power and heating.