December 21, 2018 / 5:54 PM / 5 months ago

UPDATE 1-Poland plans tax cuts and cost savings to stop surging electricity prices

(Adds details, background)

WARSAW, Dec 21 (Reuters) - Poland promised to give tax relief to energy consumers and asked its utilities to cut costs as part of measures designed to prevent surging electricity prices next year when the country holds a general election.

The measures proposed by the government, ruled by the conservative Law and Justice party (PiS), will help keep 2019 power prices at the level seen in the first half of 2018, Prime Minister Mateusz Morawiecki said in a televised press conference.

Wholesale power prices in Poland surged earlier this year, mostly driven by rising coal prices and carbon emission costs, as Poland generates most of its electricity in polluting coal-fueled power plants.

“As a result of the EU climate policies and mistakes by our predecessors, there are some mechanisms which are pushing power prices up. But we are launching mechanisms which will help keep prices stable,” Morawiecki said.

The draft law says that the excise tax paid by all electricity consumers in Poland will be cut to 5 zlotys ($1.33) per megawatt hour (MWh) from 20 zlotys.

Morawiecki also called on state-run power producers, which include PGE, Enea, Energa and Tauron, to cut costs.

To cover the cost of the tax relief the government plans to sell extra CO2 emission allowances to the tune of around 4.5 billion zlotys.

“The sum of all these assumptions will result in prices being stable at the level in the first half of 2018,” Morawiecki also said.

While the head of the energy market regulator said earlier this year that higher energy prices would have to be reflected in household bills, the energy minister has said prices will remain unchanged.

The expected rise in power prices has prompted the central bank to increase its inflation forecasts. ($1 = 3.7589 zlotys) (Reporting by Agnieszka Barteczko, editing by Louise Heavens)

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