In South-East Europe, the government of Hungary has followed through on election promises to cut electricity and natural gas prices in a move that will further pinch utilities’ revenues.

Government-mandated cuts mean that households in Hungary have the cheapest electricity and gas in the European Union, according to Eurostat data reported.

Household gas prices averaged €4.2 per 100kWh in the second half of 2013, the second-lowest rate in the EU after Romania.

Household electricity prices were €13.3 per kWh during the period.

Prices were lower only in Romania and Bulgaria.

The price of gas was down 14.6 per cent and the price of electricity fell 13.8 per cent from the same period a year earlier, calculated in euros.

Hungary’s government cut gas, electricity and district heating prices by a combined 20 per cent last year.

This year, parliament under the ruling Fidesz party approved legislation cutting household gas prices by 6.5 per cent from April 1 and electricity prices by 5.7 per cent from September 1, 2014.

Utilities’ profits down

The price cuts have made several, mostly foreign-owned, energy companies unprofitable, leading them to consider an exit from the business or even from Hungary, reported the Wall Street Journal in January 2014.

Hungary’s government is ready to repurchase utility firms to hold them in Hungarian hands and ensure prices remain low, various government officials said.

State-owned utility firm MVM Zrt. bought a 49.8 per cent stake last month from German utility company RWE AG in Fogaz Zrt., which supplies natural gas to 820,000 households in Budapest, for US$187 million.

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