Law passed to liberalize Hungary electricity market

Hungary will begin opening up its electricity market from the start of 2003 following a law passed Tuesday by the Hungarian parliament. The gradual process of liberalization will gather pace with the intention of opening up the market fully to competition by 2010.

The new law, which was passed with 211 votes for and 109 votes against, will allow large consumers – some 200 companies with annual consumption reaching 6.5 GWh each – to choose their supplier.

Hungary has applied for EU membership, which is dependent on progress towards a free market in power generation and distribution as well as access being given to foreign competition. Until Hungary joins the EU – expected to be 2004 – large consumers will be allowed to buy only up to 50 per cent of the electricity they need from a foreign supplier.

During a seven-year transition period, domestic consumers will remain centrally regulated and only 30-25 per cent of the electricity market will enjoy free competition.

Rules restricting groups to no more than 30 per cent of the generation market come into effect on 1 February 2002 although an exception is made for the state-owned Paks nuclear plant, which generates 40 per cent of Hungary’s electricity.

No single entity will be allowed to own more than three regional distributors in Hungary.

The new law will abolish central price control from 2003 and state-owned wholesaler MVM Rt will have to allow free access to market players to the energy distribution network.

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