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Yesterday the National Control Commission for Prices and Energy (NCCPE) established the heat price to KAUNO ENERGIJA. As of December inhabitants will pay 24.29 cents per kilowatt-hour.

 

Moreover, a little time before also heat production price was determined to Kaunas Heat and Power Plant (KHPP). Court will take the verdict on how lawful the latter decision is. Commission’s decision to establish prices is appealed against by KHPP to Vilnius Regional Administrative Court, because the contract of 2003 with KAUNO ENERGIJA does not define any requirements for price adjustment with the Commission. Head-over-heels situation emerged last year after the amended Law on Heat Sector. Regarding the occurrence of further twists and turns in terms of heat price in Kaunas we speak with the Director General of KHPP Antanas Pranculis.

 

- You lodged an appeal to court against the NCCPE. Should it be interpreted that you are still expecting everything to be turned back?

- We believe that the principles for determining the heat price, as laid down in the contract for heat purchase, must remain in force until 2018; thus, actions of the Commission are unlawful. However, without the court decision on the lawfulness of heat price regulation there is no other way out just as to adhere to the decision of the NCCPE.

Though the heat production price, established by the Commission, is lower than the one according to the estimates based on the provisions of the contract for heat purchase, concluded between KHPP and KAUNO ENERGIJA on 31 March 2003, the actual price, established by the Commission, is higher than the current heat price. In pursuance of the reduction of losses and unless the court decision is taken, heat to KAUNO ENERGIJA will be sold for 14.76 cents per kilowatt-hour.

 

- The small boiler house of Kaunas region generates heat for 24.46 cents, whereas the price of KHPP equals 14.76 cents per kilowatt-hour. Don’t you feel being discriminated?

- KHPP is effectively ensuring the organization of production processes and makes use of any possible advantages it has. Beyond any doubts, such situation does not satisfy our enterprise. We cannot realize why KAUNO ENERGIJA prepares no plans for maximum use of capacities of the power plant and, given that, reduces heat production costs.

 

- Should the final court decision be unfavourable to KHPP, will you claim for indemnification from the state or municipality regarding the modified operational terms and conditions to investor?

- Awaiting for the court decision we are considering such a possibility.

 

- Recently, petroleum prices have demonstrated a rapid fall; prices of its product are likely to slump. As gas, from which heat is produced, prices are linked with the prices of petroleum products, could it be expected that the price of heat, produced by KHPP, will not only stop getting higher, but will even plunge?

- Should the fuel price fall and get lower than the one established in the estimate of the heat price, similarly as other heat distributors, the company will be forced to reduce the price of heat generated. Taking into account the current situation, where world economics is hit by financial crisis and remains unsteady, no one could tell what oil prices would be after several months.

 

- When could we expect lower heat prices?

- Within the coming half a year it is almost impossible, because natural gas price is determined in accordance with the average of the price of petroleum products for six months. In other words, the price of natural gas is lagging behind the changes in the oil price for almost half a year; gas prices demonstrate slow increase, but decline is also slow. Now, unfortunately, gas is getting more expensive.

KHPP is raising its production efficiency, but in the short run jump in prices could not be avoided. Therefore, we are planning to build a new power plant. Modern power station, which meets up-to-date requirements, would use the same amount of gas to produce more heat and power.

Moreover, heat to consumers could not be raised so much if the heat sale price is limited, as well as included into the final rate for the residents. As you are aware, the price of heat, supplied to inhabitants, covers productions costs and heat distribution price.

 

- Vilnius government has passed the management of heat sector over to one hand. Shouldn’t Kaunas residents choose the same way, all the more that KAUNO ENERGIJA sustains losses to an increasingly greater degree and the distribution rate is higher than that in the capital?

- Beyond all doubts, being in the hands of one company, the management of heat sector is more efficient because advantages of scale economy are made use of and technical innovations are optimized leading to the possibilities to supply heat at lower costs. We believe that sooner or later Kaunas government ought to resolve the issue of the optimization of heat sector.

 

- Taking into account the present economic situation, do your plans for the investment into the construction of a new power plant remain?

- Our enterprise does not renounce its plans for the investment into the construction of a new power plant, but various variants are under consideration with reference to common Lithuanian projects in energy sector, such as links with the EU Member States and construction of a new power plant. Moreover, great significance is placed on investment climate, price tendencies in energy market, their regulation, bank policy and solvency of national companies and residents in accounting for energy resources.

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