Hynek Beran & Vlček: Energy Failure & Shock Decision

How do you perceive this situation?

I personally don’t regret it. There are more colleagues who could do this job just as well or even better, for example docent Ševčík, docent Lízal or the former first vice-chairman of ERO Ivan Noveský, and I would have to limit part of my current professional activities to educational, publishing and lecturing activities. I applied mainly for the promotion of the energy policy of the new government coalition. But no one had any idea that the outgoing government would allow itself to do this to the new coalition at the last meeting, I applied for the selection process mainly to them. They did not have it on the agenda of the meeting, outgoing Minister Lukáš Vlček brought this item to the meeting at the last minute. I learned that it was decided by the commission, but I wasn’t at any of the interviews and I don’t even know who was a member of it.

What is the purpose of the Energy Regulatory Office?

It is primarily consumer protection. At the time of the energy crisis, however, the ERO management claimed to everyone that it did not have the legal authority to do so. In contrast to Slovakia, where they had the same powers, the state only had a minority share in the Slovak Electricity Company and they had half or a third of the prices. We simply had a different regulator than the Slovak one, and nobody minded. Those who earned hundreds of billions of crowns from it may be fine with this.

At ERO, they also decide on the so-called “regulated payment” for electricity, primarily for its transport and network stability, which is currently roughly half of the price paid by the consumer for electricity. They decide not only on the amount of the price, but also what energy companies have the right to include in it. They also decide which investments are included and which are not. If, for example, we build a solar park with subsidies plus substations and substations, which cost as much as the park, but without subsidies, it is the ERO that decides that it is a necessary part of our energy system and that we, as consumers, will pay those investors in fees. Otherwise, the investor would have to pay for it himself, and the investment would usually not pay off.

Similarly, the construction of “highways” for the import of electricity. Nothing much is being built in transport, but investments in importing electricity from Germany are developing, and ČEPS collects transmission fees from us for this. They also approve increasing fees for the stability of the networks, including their operating rules, for example the possibility of regulating surpluses by energy absorbers, which are already prohibited in Germany. Otherwise, none of the consumers would willingly pay for this.

Let’s go back to the energy crisis, wasn’t ERO the only body involved in it?

Of course not. But it is similar to if the lawyer, who is by law your only defender, did not appear in court or declared that he did not have sufficient competence for this defense and left you to the mercy of the opposing party and its extreme demands. In fact, it was even worse, because the ERO at the time advocated “following the rules of the market” and did not even notice that only 10 percent of our electricity went through the market on the Leipzig Stock Exchange, and the rest of the increase in price was due to domestic price dictates. If you are already advocating such a “market”, you are asking for the most “marketable” prices for your protected population, often prices that are not even available in other European countries. We may have a tradition of this already in the 1950s, when defense lawyers asked for even the most severe sentences, and this position of authority is quite similar to that. This started high inflation, which deprived all of us of a third of our savings, as well as the devastation of part of the industry, where many of us lost our job opportunities. Would you hire such a lawyer as consumers even after the election?

What was the role of other bodies?

The role of MPO, i.e. Minister Jozef Síkela and his successor Lukáš Vlček, is most visible. I think that we will remember what happened in our energy sector during their government for many years to come. However, the role of the circled politician Zbyňek Stanjura at the Ministry of Finance is less visible. He is the one who managed our majority property in the state-owned company ČEZ in such a way that not only did it become more expensive, but that our company still has to borrow for nuclear power plants after the whole crisis and the high cost. And all the time, we produced half of our electricity needs in nuclear power plants and sold it for up to forty times the production price. Even the monopolies importing goods from Asia can no longer manage such a margin, but this was within one country. Consumer protection tolerated it, and our manager of the national wealth, in turn, did not care where the money was flowing through the various exchanges and buyouts. The Czech National Bank will also supervise the stock exchanges, so the functioning of collapsing stock exchanges beyond the limit of usury could be stopped very easily.

How is the ERO responsible for the current situation with acceleration zones?

ERO is only at the beginning of this game with setting charges for the use of electricity networks, but it is the main price-setting body here. Fees for sharing renewable energy in municipalities are so disadvantageous that it is cheaper to buy natural gas from Azerbaijan or Russia for two kroner than to pay three kroner for electricity from the neighbor across the street. It is a fee that they know about, and by their inaction they are consciously blocking the entire start of community energy, which was delayed by almost two years compared to the requirements of the European Union. This will force you to produce all of your production in just one house and not in one village as prescribed by the EU, because it just isn’t worth it. They know about it.

Subsequently, the environmental authorities, in cooperation with certain lobbying associations, come to the conclusion that we have little renewable energy, which does not pay for us in this way in the municipalities, and they enter a model that does not even have correct inputs. From this they will then calculate how many acceleration zones we need. It’s like if they overcharged you for city transport and then wanted to cancel it due to a lack of passengers, and then wanted to build an airport for your money and pass off the investor’s profits as public interest. And the ERO is responsible for those prices. This was also the main reason for my candidacy, that I decided to organize the new coalition in this aid and help the municipalities with the real development, I am currently dealing with several such projects in practice, for example in Jablonec nad Nisou, which is probably the largest such community project in the Czech Republic.

The final solution to the issue of renewable electricity in the Czech Republic will then occur if ministers Vlček, in cooperation with ERO on the one hand, and minister Hladík on the other, agree that we need to build renewable sources and that few of them are built in municipalities. Then there are new wind and solar parks for a pittance and an investment opportunity and support for the new barons. With Lukáš Vlček, I don’t understand how he, as the former successful mayor of the small village of Pacova, could tolerate it.

What risks do you see if there are no changes at the Energy Regulatory Office?

First of all, there is a lack of protection of the energy consumer, which they are supposed to do by law. Under the previous coalition, they transferred their competences from ERO to the Ministry of Labor and Social Affairs. So they are not at all concerned with the prevention of artificial energy price increases, but another authority will use our taxes to compensate the living costs of the weaker ones who can no longer manage the energy poverty, precisely because of the inactivity of the ERO in the area specified by law.

Furthermore, the completion of those “highways” for summer energy imports from Germany. Will this seasonal benefit for retailers, which brings us blackouts as a result, pass off as consumer welfare and we will pay here in increasing regulated energy prices? At the same time, the new government has pledged to reduce this particular component of the price. Do we have it?

In the area of ​​municipal and community energy, which has so far been suppressed, will we continue to keep the fees for sharing renewable energy in municipalities so high that, despite all the European subsidies, it still pays for us to import natural gas, rather than heat our domestic water with electricity shared from our neighbors, and instead approve single-purpose investments in networks for solar and wind barons, which will increase the fees for all of us?

Officials and the Council at the ERO, who already functioned in this way under the previous government coalition, are mainly a risk for the implementation of the program statement of the new one, not only in the field of energy, but also in the field of inflation and social harmony. The inactivity of the previous management of the ERO during the energy crisis had a fundamental influence on this.