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Friday, July 19, 2024

Inflation in Poland in 2024. What about energy prices for households? Three scenarios from mBank economists

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The amount of energy bills in the second half of 2024 is a source of uncertainty. Minister of Climate and Environment Paulina Hennig-Kloska announced that her ministry is “making preparations” for possible solutions that would apply in the second half of the year, when the price freeze ends. We will get to know the proposals in the coming weeks. mBank economists have prepared three inflation scenarios for this year, because – as they emphasized – “withdrawing inflation shields may take many forms.”

Until June 30 this year. Mechanisms to protect households and the above-mentioned so-called consumers sensitive to energy price increases. It is not known yet whether the solutions will be extended. On Monday, on RMF FM, Minister of Climate and Environment Paulina Hennig-Kloska was asked whether electricity consumers should be afraid of mid-2024. The head of the Ministry of Infrastructure and Environment declared that “these prices will definitely not go up.”

She emphasized that current solutions allow the average user to save PLN 500 on electricity for half a year. Hennig-Kloska announced that the Ministry of Climate and Environment is “making preparations” for possible solutions that would apply in the second half of the year. The minister announced that the first proposals on this matter will be presented within the quarter.

mBank economists emphasized that “changes in energy prices on household accounts will be the main force determining the scale of inflation acceleration this year.”

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Three scenarios for inflation in 2024

Representatives of this bank have prepared three scenarios, because the withdrawal of inflation shields may take many forms.

“If the government decides to maintain all tariffs until the end of 2024 and the Energy Regulatory Office does not change any of the tariffs, we estimate inflation at the end of the year at 6.4 percent.” – we read.

In the case of implementing the intermediate variant, which is the basic assumption, inflation at the end of the year it is expected to reach 7.7 percent. In the opinion of mBank economists, this is the “most likely” scenario.

“In the most severe scenario, with a full and one-time release in July 2024, we will end up with inflation of 9.4%, so 3pp above the scenario in which nothing happens,” mBank economists noted.

Electricity prices in 2024

The maximum is valid until the end of June price of electricity at PLN 412 per megawatt hour (MWh) net up to a specified consumption limit. The limits are 1.5 MWh for all households, 1.8 MWh for households with people with disabilities, 2 MWh for families with the Large Family Card and for farmers. They are half as much as in the whole of 2023, because the act is to be in force for half a year.

After exceeding the consumption limit, these consumers will pay the maximum price of PLN 693 per MWh. The same maximum price is to be paid by local governments, public utility entities and small and medium-sized enterprises.

mBank economists indicated that a complete abolition of the shield would mean that the scale of increases on household accounts in the most popular G tariff would potentially amount to approximately 50%. – almost 70 percent tariff and 40 percent distribution.

At the same time, they pointed out that increasing the distribution tariff, i.e. withdrawing the shield, could in a sense be gradual, e.g. by unfreezing 20%. every three months until the end of this year. In the case of a price tariff, the market may provide support. As we read, average wholesale prices of electricity for trading companies with delivery in 2024 are slightly below PLN 693. In addition, the government would still have to subsidize trading companies in 2024.


At the same time, in their opinion, the President of the Energy Regulatory Office could only “very theoretically” approve new, lower electricity tariffs in the middle of the year. “Very theoretically, because the current tariffs were not based on forecasts, but on data on actual, secured energy prices for 2024. In short, it is very unlikely,” they explained.

Economists’ forecasts therefore show that the real scale of the increase in the entire bill (in the most popular tariff group) from July 2024 is at least 25%. “However, the risks here are spread upwards, because it will require an increase in the deficit for 2024 beyond what is currently in force,” they noted.

Gas prices

There is also a maximum gas price of PLN 200.17 per MWh until mid-2024. “The Energy Regulatory Office has introduced a new tariff (a drop from PLN 484 per MWh to PLN 318 per MWh), but it is still above the maximum price, so it is not actually paid by households,” mBank economists emphasized.

Experts estimated that removing the shield would result in the gas tariff for households increasing by approximately 50% and the entire bill by approximately 15%.

“It is less than in the case of electricity, but still a lot. As a consolation, we can add that (in the Central Statistical Office’s basket) the weight of gas is much lower than for electricity (so it constitutes a smaller burden on the budget). Moreover, perhaps the Energy Regulatory Office has there is still some room for maneuver,” it added.


Economists explained that the President of the Energy Regulatory Office has room for maneuver in the case of gas prices because electricity contracts are characterized by much lower seasonality throughout the year. “In turn, gas prices in contracts are the highest at the beginning of the year and then fall (because the heating season is ending). Therefore, there is probably some room for tariff adjustments, because companies have only secured the higher price part of the year. Meanwhile, prices on the stock exchanges they keep falling,” they noted.

As a result, mBank economists assume an increase in the gas bill by 8%. in the second half of the year.

Heat and coal prices

In their opinion, the situation related to heat prices “is much more complicated due to the fragmentation of suppliers, fragmentation of approved tariffs and different pace of approval of fees by housing cooperatives.” “The scale of growth is probably something between gas and energy, so we are aiming – for an even balance – at 10 percent. It will not be one jump, but rather a process spreading price changes over the entire second half of the year,” we read in the report.

mBank economists do not expect a sudden increase in coal prices.

“Fuel fuel is mainly coal. Our estimates indicate continuous declines in purchase prices. We consider the scenario of another sudden increase in coal prices this year unlikely,” emphasized the bank’s representatives.


Main photo source: Shutterstock

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