Slovenia imposes mandatory state approval for electricity, natural gas prices

For the next six months, suppliers of electricity and natural gas will have to seek the approval of Slovenia’s government to increase prices.

The Government of Slovenia has passed a decree requiring suppliers of electricity and natural gas to obtain prior approval for price increases for certain groups of consumers.

The measure, limited to six months, is intended to prevent sudden and disproportionate increases in energy prices in conditions of increased uncertainty on the energy markets, according to the Ministry of Environment, Climate and Energy.

The law on price control allows the government to temporarily intervene in the formation of prices in cases where market conditions could cause serious disturbances or threaten the social security of the population.

A temporary mechanism for controlling energy price increases

The government adopted the decree on obtaining prior approval for increases in the prices of electricity and natural gas for certain groups of consumers to strengthen the protection of vulnerable groups of consumers and ensure a more predictable and stable supply of energy, the ministry explained.

It represents a temporary mechanism for controlling the increase in energy prices, it added.

Of note, Aleksander Mervar, CEO of Slovenia’s distribution and transmission system operator ELES, recently pointed out that prices of electricity for delivery late this year were 40% higher compared to pre-war levels.

The new energy crisis was caused by the US and Israel’s war against Iran. The conflict has led to the closure of the Strait of Hormuz, the corridor for 20% of the world’s crude oil and 20% of liquefied natural gas (LNG).

The prices of natural gas on European exchanges have at one point soared 60% from the level before the war, while currently that increase is 25%. Gas is important for electricity prices in Europe because gas-fired power plants dominate the electricity market.

The regulation applies to several categories of consumers

According to the decree,  suppliers must obtain prior approval from the government before any increase in prices for certain customers.

In the electricity market, the legislation applies to households, small businesses and to the consumption of electricity in joint areas of multi-apartment and mixed-apartment and office buildings.

In the natural gas market, the measure applies to households, users of shared heating systems, basic social services, kindergartens, primary schools, health centers and certain small businesses and heat suppliers.

With the limited duration of the measure, the government reserves the right to reassess the situation on the energy markets after six months.

Of note, the Slovenian government has also prepared subsidies for the energy-intensive industry.