E.ON Hungária’s political risk consultant must have been on holiday because the company found it a good idea to offer cheaper gas than the state-owned utility company (NKM Földgázszolgáltató Zrt.). When the government spokesman heard of it, he didn’t mince words:
“E.ON should perhaps hold their horses and stop interfering in the election campaign.”
How did E.ON find it a good idea to offer a 5% discount compared to the state-owned champoin (NKM Földgázszolgáltató Zrt.) – when it has been obvious for years that
1) the state (or cronies, same thing) wants to buy up all utility companies – and is unafraid to drive them out of business to make them sell, and
2) Orbán fashioned himself as Utility Bill Warrior Who Protects His People From The Evil Utility Bill Demon ever since his 2014 election campaign.
E.ON even had the cheek to add that they are able to sell gas cheaper because they are buying it at market prices – implying what economists already knew, that the government’s price control actually made the gas more expensive for the retail consumers.
First, I thought E.ON was reassured in Germany that they have full political support – but I was wrong. When the government spokesman threatened them for “interfering in the election” with the cheaper gas, they quickly apologized and walked back on their words, claiming that it wasn’t like that, it wasn’t for retail consumers, it wasn’t them.
The whole thing suddenly became chilling.
Meanwhile, retail consumers keep receiving utility bills that state (as per government order) that “your government has saved …. forints for you this month” – in Fidesz-orange and in Fidesz’ type font. Every single month.
Orbán’s 2014 elections’ wonder weapon was Orbán the “utility reduction” (rezsicsökkentés) – price control on domestic gas, electricity and water providers. Orbán made utility providers to freeze and then cut domestic utility bills by 10+10%. Not even Fidesz, or the government. Orbán posed as personal savior of retail consumers.
He even ordered utility companies to write on each monthly bill that “Your government has saved you XXXX forints on this bill” – in Fidesz-orange and complete with instructions on type font. Housing representatives were ordered to hang a note in the buildings reminding inhabitants how much the government saved them each month.
When the targeted utility companies started making losses due to price control, they weren’t subsidized (not that it’s a good idea) – they were bought. And subsidies suddenly started flowing. (Actually, one way to secure profits to Fidesz-friendly (often offshore) companies is to give them access to cheaper gas at market prices and let them resell to the Hungarian consumer, at state controlled prices.)
The market prices of said public utilities have declined in the meantime – due to market forces, not the government. Yet, the utility bills are to this date frozen on their 2013 level (minus 10+10%). The difference is now significant.
5.8 billion forints of profit have been realized by the state dealer of natural gas last year on the difference between (evil, expensive) market prices and the artificially high, state controlled prices. Gas prices have fallen all over Europe last year, except Hungary, the Netherlands and Sweden – according to Eurostat. Hungary still has the second lowest gas prices and fourth lowest in electricity prices (domestic), but beats everyone as it is one of the most expensive on purchasing power parity. In 2015-16 gas prices in the EU have fallen by 10.5% on average, except for Hungary (up by 1.5%).
Orbán then accused Brussels in one of his infamous direct mail and billboard campaigns (the ‘Stop Brussels!’ one – there were many) of trying to unleash market prices on the poor Hungarian consumers by fostering competition in the sector. And many of the news-starved consumers though that if the government sent a letter telling them, it must be true… Besides, markets are a swearword.
Featured image: Tumblr by unknown