BUDAPEST. JULY 2. INTERFAX C.NTRAL EUROPE - Hungary will fully liberalize both its wholesale and retail electricity market from January 1 2008, after the new Electricity Act was passed by parliament last week, Minister of Economy and Transport Janos Koka said Monday.
"The new act will establish conditions that increase competition on the market, as well as improve the security of supply and the protection of consumers," Koka said after holding talks with representatives of Hungarian power sector firms.
The new act will separate so-called universal providers - the six current regional power utilities - that will be required by law to continue supplying their own regions, from free market providers, which will be allowed to offer power to consumers anywhere in the country.
The current monopoly of state-owned power company MVM as the sole wholesaler on the market will be eliminated, as from January 2008 any electricity company will be able to procure power directly from producers, instead of through MVM.
In addition, households and small companies will also be able to choose their providers, by either remaining with their universal providers or opting to buy power from a free-market provider. Industrial users have had this option since 2003.
"If at least 7-8% of households change provider, then the new system will already be operating efficiently; however, I expect this rate to be higher," Koka said.
The market will be opened to an unlimited number of providers, either Hungarian or foreign, he added.
He added that although MVM will lose its monopoly position, it will be able to apply for a universal provider license and thus compete with other companies on the market.
Mavir, a subsidiary of MVM, will continue to act as system operator, with Koka declaring that the independence of the company must be guaranteed and strengthened.
The minister said that many Hungarian firms are at a competitive disadvantage, as they are able to buy power only at prices that are sometimes 2-3 times higher than in Western Europe.
Among other provisions of the new act, Koka said that support of renewable energy production will continue, with special emphasis on bio-energy and geothermal.
Relevant legislation, including some five government and 20 ministry-level decrees, are to be finalized in the next few months, while universal providers will have to submit their price proposals 45 days ahead of their start of operations at the latest.