Electricity price hikes prompt discussions on extensive aid in Latvia

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This week, the government must agree on support measures to compensate for rising electricity prices. Several proposals are currently viewed, Latvian Radio reported December 20.

It is planned to agree on a reduction of the distribution network tariff and the payment of housing aid for the population with lower incomes, the exact criteria of which are not yet agreed upon. The Ministry of Economics is already planning additional support measures for large companies and for municipalities.

Last week, coalition partners decided not to advance the Economics Ministry's offer to lower the value-added tax (VAT) rate to 5% for electricity in the winter months, instead agreeing to reduce the distribution tariff by 50%. This would allow households to save €3-€10 a month. This option is chosen because it benefits both residents and entrepreneurs. The VAT reduction, which was not supported, would not have a large beneficial effect on business. The Saeima should see the necessary legislative amendments this week and hope that a smaller distribution tariff could already be applied to bills for December, said Ilze Indriksone, parliamentary secretary of the Ministry of Economics.

It is planned to extend the number of beneficiaries of housing aid.

“The Ministry of Welfare is proposing to extend the range of beneficiaries by less than 7000 households, which I believe is very small for the total number of households in Latvia and even the number of low-income households,” Indriksone said. “Actually, if you are low-income, it does not mean that you qualify for a housing benefit. This should be [applicable] very broadly this year, with a large number of population groups, not just pensioners and people with disabilities."

A separate proposal is still pending on support measures for large energy-intensive companies.

The Ministry of Economics will be prepared to offer the statutory option of supplying electricity directly to the company, not at the price of the stock exchange, although this would mean lower revenues for Latvenergo. A short-term solution with a partial exit from the stock market is also being encouraged by the faction of the Union of Greens and Farmers of the Saeima. Its spokesman, Armands Krauze, said that examples are all around, as Belgium, France and Lithuania are considering such an approach.

The increase in heating and gas tariffs could lead to additional state aid measures being prepared for local governments with loan or deferred payment programs or compensation for the tariff margin, Indriksone said.

Currently, the Coalition also does not support the Ministry of Economic Affairs's proposal to reduce the VAT rate on gas, which has also seen prices rise significantly this year. There are no other offers at the moment to cut heating bills.

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