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Approval of the new heat prices is hanging up due to vague legal situation. In 2003 GAZPROM and KAUNO ENERGIJA, controlled by Kaunas City Municipality, entered into the contract on the purchase of KHPP and it was agreed that the price would not be adjusted, as a result of what the Russian gas monopoly has been selling gas to the power plant cheaper up to today.

The contract defined that during the first five years, namely up to May of this year, the heat price to KAUNO ENERGIJA would equal 6.5 cents per kilowatt-hour, whereas over the next ten years it would increase to recover funds invested. However, as of this year, pursuant to the new Law on Heat Sector, the National Control Commission for Prices and Energy (NCCPE) is entitled to regulate the price of heat generated by the power plant, whereas GAZPROM, underlining investment and contractual obligations, objects for any such price adjustment.

 

 

Manager of KHPP Antanas Pranculis states that, should the price be regulated, the agreement concluded some years ago will cease to be valid, just as any investment agreement thereby. Virgilijus Poderys, the Chairman of the NCCPE, also acknowledges that the current Law on Heat Sector is against the privatization contract of KHPP.

“Just after the end of the first five-year phase, which was unprofitable to GAZPROM, did the regulation of prices begin. Thus, hoping to recover the money during the second period, that period would become unprofitable”, Mr Poderys realized the complication of the situation. For two weeks a compromising decision will be the target of a working group, created from the representatives of Kaunas authorities, NCCPE and GAZPROM.

 

 

“The Law has been amended and the heat prices have come to be regulated. Should we follow the contract of 2003 and formulas therein, today Kaunas inhabitants would be paying for heat almost the highest tariff in Lithuania, i.e. 30 cents per kilowatt-hour.

We are talking with investors on reviewing the formula for the calculation of heat price. We are searching for the ways of how the price of heat, purchased from KHPP, could be reviewed”, said Jonas Koryzna, the Chairman of the Supervisory Board of KAUNO ENERGIJA, which has a 15-year contract with KHPP. Unless the matters clarify, Municipality Council has left the current tariff of 14.37 cents per kilowatt-hour in force in Kaunas until 1^st of May.

 

 

“Considering the current situation, heat price will be definitely on an increase. Should we calculate the price according to the new formula, the new tariff would get really high. I stress, however, that GAZPROM was able to rise prices also earlier, but did not do that”, Denis Fiodorov, the Head of the Board of Energetics Development of the Russian gas concern GAZPROM was in the mood for negotiating and not litigating.

Kaunas Mayor Andrius Kupčinskas emphasised that all the parties concerned preferred no litigation at court as legal proceedings would linger for several years. KAUNO ENERGIJA has submitted to the NCCPE the new heat tariffs. With reference to forward estimates, heat price should increase by approximately 44 %, i.e. from 14.67 to 21.12 cents per kilowatt-hour. However, this price is not final as there are no precise calculations as to how much the heat, generated by KHPP, costs at this stage for the increase in gas price resulted in a more expensive heat production.

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