ERU reported that electricity price for retail customers for 2007 will increase by 7.9% y/y, which is inline with our estimate of 7-8% y/y increase.
Note that CEZ's wholesale base-load price for 2007 increased by 19.5% y/y to CZK1,244/MWh (70% of total wholesale price) and the price for seasonal products by 10.8% y/y to CZK1,549/MWh (30% of the total wholesale price). As a result, the average wholesale price for 2007 increased by 16.87% y/y to CZK1,342/MWh. The wholesale price forms c40% of the retail price; the other components of the retail price form VAT, transmission, distribution costs and fees for renewable energy support.
Given the 19.5% y/y increase in the wholesale base-load electricity price for 2007, we did not believe that the Regulatory office would allow CEZ to fully reflect the increased asset base of its distribution companies following their restructuring into the distribution fee (calculated on RAB - Regulatory Asset Base). The regulatory office may allow CEZ to include higher depreciation charges stemming from the asset revaluation into RAB calculation.