Background information

In 2010, the Hungarian Parliament decided to freeze energy prices for individual consumers. In 2011-2012 they cut the prices of gas, electricity and district heating by 10% and 11.1% respectively.

In May 2013 Act 54/2013 on energy price cuts was adopted. This socially-motivated state intervention, known as the "utility bill reduction scheme", obliged service providers operating under market conditions to freeze or reduce the prices of services they provide.

In 2018 another measure called the "winter utility bill reduction scheme" gave cash benefits to households using gas for heating or district heating. The one-off benefit was HUF 12,000 (about €33) per household.

As a response to growing energy prices in 2022, the government updated its utility cost reduction programme. As of 1 August 2022 a new tariff, called the residential market price, was introduced for households. As a result, the lower, subsidised energy prices will only apply up to a set usage limit, above which higher prices will be paid, which are closer to market prices. In the case of gas consumption there are higher limits set for families with three children or more: this is specified in government decree 290/2022.

Content of measure

The price cap was originally set at a usage limit calculated in cubic metres of gas used per year for gas, but under a modification introduced on 23 August in government decree 324/2022, the subsidised limit for gas was set based on heating value (in MJ). This change is meant to offset the differences in the quality of gas serviced throughout the country and be more equitable. Thus the annual limit is now 63,645 MJ for households, and consumers are to pay HUF 102 (€0.25) for a MJ of gas for their consumption below the limit, and HUF 747 for each MJ in excess, while the market price is HUF 1,020.

There has been no change regarding electricity. The limit is 2,523 kilowatt hours of electricity used per year (210kWh/month) by a household. One kilowatt hour of electricity will cost HUF 36 below the limit and HUF 70.1 above it, while the market price is HUF 268.9, as the government commissioner in charge of the scheme had said on 22 July 2022. The limit for large families for gas was raised to 22,086 MJ per year for three children and another 11,043 MJ for every child after that.

Use of measure

According to the government, 75% of Hungarian households will stay within the limit for subsidised energy prices in the utility price cap scheme. “Four million out of five million electricity consumers have below-average consumption. For gas, about two-thirds of the 3.5 million consumers will stay within the price cap limit,” public media website hirado.hu reported. In contrast, a survey commissioned by online newspaper napi.hu said 85% of households will see a rise in their energy bills under the new scheme.

The economic research institute GKI calculated that the narrowed subsidy scheme would save HUF 636 billion (€1.59bn) for energy service providers next year, and for the central budget, as the government will not have to pay these subsidies to providers. Households will pay a monthly HUF 13,000 (€32.5) more for energy bills, GKI said. For households that do not use electricity or gas for heating (about 35% of all households), costs will go up by HUF 20,000 (€50) a month on average, unless people start cutting back on their consumption, it added.

According to economic news portal G7.hu, the negative impact of streamlining the utility price cap scheme on household utility costs remained limited, at least on a macro level, during the 2022/2023 heating season. The share of utility costs in household incomes rose to a level similar to the level in the 2017/2018 heating season. Still, some segments of the population – for example, low-income pensioners living in poorly insulated houses with gas heating – find themselves in a difficult situation

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Does not apply to businesses	Applies to all citizens

Actors and funding

Actors	Funding
National government	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	No involvement	No involvement
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: N/A

Involvement

No social partner involvement has been reported.

Views and reactions

In July, the Budapest-based public services trade union FÖX said the energy price cap changes will raise energy bills unbearably for public employees and families. They also criticised the government for failing to engage in social dialogue regarding the measure and introducing it without impact studies or consultations.

The National Federation of Associations of Disabled People MEOSZ said that some 600,000 thousand disabled people will need immediate support over the expected rise in their energy costs. MEOSZ leader Ágnes Kovács demanded that the limit for the capped price should be doubled for the disabled, as they have higher energy needs. She added that energy costs of institutions caring for the disabled will also rise.

Also a letter by the Association of Social Workers in Hungary (SzMME) and the Social Professional Association (3Sz) warned that about one million people in social care could suffer from the institutions’ inability to pay the higher energy bills in the new system, which means they could shut down.

Sources

• 21 July 2022: Govt decree 259/2022 (njt.hu)
• 25 July 2022: Budapest-based TU FÖX concerned over price cap change (hvg.hu)
• 01 August 2022: Social orgs: 1m people in social care can lose care in wake of energy price rise (nepszava.hu)
• 05 August 2022: Govt decree 290/2022 on rules for large families (njt.hu)
• 09 August 2022: Napi.hu survey: 85pc affected by energy price change (www.napi.hu)
• 17 August 2022: MEOSZ: 600 thou need support over rising energy cost (www.penzcentrum.hu)
• 23 August 2022: Govt decree 324/2022 on modified rules for gas price cap (njt.hu)
• 23 August 2022: Public media: Utility price cap stays for average energy consumer (hirado.hu)
• 24 August 2022: Govt decree 217/2022 (njt.hu)
• 14 September 2022: Energy bill cut scheme changes to add HUF 13,000 to monthly costs on average (hvg.hu)
• 31 May 2023: Govt was right about price cap scheme usage limit (g7.hu)