Ministry proposes 2022 end to electricity surcharge

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The Economics Ministry has submitted to the government committee a report that lists possible solutions for discontinuing the mandatory procurement component in electricity tariffs as of 2022, reported the LETA newswire January 4.

The Economics Ministry's report will be reviewed by the Cabinet of Ministers' committee on Monday, January 7.

The ministry offers a number of measures to be implemented so the current mandatory procurement component could be discontinued as of January 1, 2022.

"If the suggested measures are implemented in their entirety, interests of society and national economy will be balanced up in the medium term. At the same time, they will ensure security of power supply in Latvia and make it possible to achieve long-term energy policy goals," said the ministry.

The measures suggested by the ministry include halting over-subsidizing all power stations that benefit from the mandatory procurement component and cutting support for power stations not in operation, as well as introducing stricter requirements on power stations that are powered by biogas.

The Economics Ministry is planning to submit amendments to the Electricity Market Law to ensure that, as of January 2022, state support for electricity production be based on market principles and annually do not exceed 0.3 percent of gross domestic product.

Unlike the Economics Ministry's previous offer, now the ministry proposes reducing the mandatory procurement component without the introduction of a subsidized energy tax.

"At this point, support for new power stations is not being planned. The market model will concern trustworthy power producers and contribute to achieving Latvia's renewable energy goals," said the ministry.

Economics Minister Arvils Ašeradens (Unity) said that subsidized power producers would have to prove that they could operate in a free market and observe the rules of fair competition.

"Of course, we anticipate that companies may have objections, although we have done a lengthy process of harmonization with all the parties involved. Lawsuits cannot be ruled out completely either, as no one will want to give up their privileges. The pending changes will also have to be harmonized with the European Commission. And yet, I am confident that what we are offering is the best possible way to legally have the system of mandatory procurement component abandoned as the system has compromised itself," said Ašeradens.

The time is right to discontinue the current system, added Ašeradens. Following extensive inspections, support for dozens of power stations has been halted to prevent the total cost of the mandatory procurement payments from increasing by EUR 391 million, said the minister.

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