Protection of gas customers in 2023: maximum price of PLN 200.17/MWh and VAT refund

The Act of 15 December 2022 on special protection of certain gas fuel customers in 2023 in connection with the situation on the gas market (Journal of Laws (Dz.U.) 2022, item 2687) enters into force on 21 December 2022. It limits gas prices for eligible customers in 2023 to PLN 200.17/MWh, freezes distribution charges at their 2022 level and provides for a refund of VAT on invoices for low-income households. For biogas and biomethane producers it is market context, in which gas prices remain a matter of state intervention.

What is changing

Eligible customers are mainly households, as well as housing communities and cooperatives and other entities indicated in the Energy Law. Suppliers receive compensation from the Settlement Administrator (Zarządca Rozliczeń S.A.), equal to the product of the gas volume and the difference between the tariff price and the maximum price. Compensation applications are submitted by the 25th day of the month following the settled month; the first, for January 2023, will be possible to submit from 15 February 2023.

The act also introduces a solution for low-income households: the possibility of recovering VAT on gas invoices if income does not exceed PLN 2,100 a month in a single-person household or PLN 1,500 per person in a multi-person one.

Significance for the industry in Poland

The maximum price of PLN 200.17/MWh is clearly lower than the wholesale levels of 2022, so the act shifts part of the burden of the crisis from customers to the budget. For biogas and biomethane producers this raises several issues:

• the mechanism does not cover renewable gas producers or biomethane prices,
• the low price for protected customers does not translate into revenues for producers, who sell gas at market or contract prices,
• gas prices for industry and so-called unprotected customers remain market-based, so that is where biomethane has the greatest chance of competing.

At the same time, freezing prices may reduce the pressure for energy efficiency and fuel switching in households, which is a drawback of such solutions from the climate policy point of view.

Effects on the market

The maximum price works like a subsidy directed at selected customers and does not change the situation of those who buy gas at market prices. The compensation mechanism requires efficient settlement and the availability of funds in the dedicated fund; payment delays may burden suppliers' liquidity. From the energy policy point of view it is also significant that further years of intervention cost the budget billions of zlotys, which increases pressure for action to reduce gas consumption and replace it with local sources, including biogas.

What next

Compensation settlements will continue until 2024. Next year the government will have to decide on further steps: maintaining or ending the protection. For the biogas industry it is important that the new rules do not overlook renewable gases and that they ensure stable support conditions that do not depend on ad hoc price interventions.