Croatia moves to liberalise energy prices

ZAGREB Fri Oct 19, 2012 8:30am EDT

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ZAGREB Oct 19 (Reuters) - Croatia's government will no longer determine energy prices, notably those of gas and electricity, under an energy law passed by parliament on Friday.

From now on, energy firms will determine energy prices alone, but will have to get an approval from the independent energy sector regulator, HERA.

The government has traditionally used energy prices as a welfare policy tool, capping them to defend living standards, but Croatia is making reforms ahead of joining the European Union next July.

The state-owned electricity board HEP and the biggest gas trading company, Prirodni Plin, have often piled up losses as a result of being forced to sell energy at prices lower than those at which they bought it abroad.

Prirodni Plin is owned by oil and gas group INA. Hungary's MOL holds almost 50 percent of INA while the Croatian government owns some 45 percent.

The government and experts hope the new pricing model will allow energy companies to run healthier businesses and increase competition on the local energy market.

The prices of oil products have long been outside the government's control and depend mostly on price movements on the Mediterranean crude market.

Croatia has scant oil reserves, but produces more than 60 percent of its gas needs and around 70 percent of its electricity consumption. (Reporting by Igor Ilic; editing by Zoran Radosavljevic and Jason Neely)

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