Introduced in 2013, the utility cost reduction program (also known by its Hungarian name “rezsicsökkentés”) meant a shift from free pricing policy to regulated prices in the Hungarian energy sector.
In the early 2010s, Hungarian households, in general, were spending more on utilities than on food, leaving many families struggling to cover the rising monthly costs. Amplified by the aftermath of the 2008-2009 economic crisis and rapidly increasing unemployment, more and more families found themselves living in energy poverty.
Aiming to correct the economic failures of the previous, Socialist-led governments, and upon assuming a two-thirds majority to govern, Prime Minister Viktor Orbán and his freshly formed government took a number of immediate steps to ease the burden on Hungarian society. And in 2013, we saw the need to intervene to reduce the high share of household energy spending in the average Hungarian family’s budget.
Why was this necessary? In Hungary, largely due to infrastructure reasons, there was never any real competition for customers in the energy sector, leaving citizens with little to no control over their choice of service. By significantly reducing utility prices, our main goal was to improve the living standards of Hungarians and ensure that people are able to keep as much of their income as possible for other living expenses. Implemented gradually in several steps, the utility cost reduction program quickly proved to be a roaring success, as energy poverty in Hungary began to plummet.
Besides cutting prices, we have also taken several other measures to promote low energy bills: Among other things, we have been supporting the replacement of household appliances with more energy-friendly ones, and we introduced a home renovation grant to improve the energy efficiency of homes.
Keeping energy costs down, however, is not only important for families; it also translates into a competitive advantage for European businesses, as we have consistently stressed when Brussels attacks the Hungarian measures. As Prime Minister Orbán has said on multiple occasions, it is clearly Hungary, not Brussels, that should decide how much Hungarian people should pay for their utility bills, and this should remain a national competence.
Today, the prolonged war, combined with Brussels’ sanctions on Russia, is causing energy prices to rise dramatically. To protect the energy supply of Hungarian families and the Hungarian economy, the Hungarian government, like many other countries, has declared a state of energy emergency.
While our primary goal remains to keep Hungarians’ energy bills low in the face of further increases in energy prices, due to the challenging global political and economic climate, Hungary must adapt the utility cost reduction program to some extent.
Keeping this goal in mind, the Hungarian government introduced a new tariff, called “the residential market price,” earlier this week, which is much more favorable than the global market price of gas and electricity. From August, there will be a reduced price for natural gas and electricity up to a certain level of consumption – that is, the average consumption – beyond which a higher price will be charged.
It is important to underline that all households will continue to pay reduced prices up to this average consumption. Even amid the war, Hungary is the only country in Europe to use utility price caps to protect families, and it will continue to do so. Our aim with these measures is to ensure that Hungarian families are protected as much as possible, despite the current energy crisis in Europe.