25.Sep .2021 20:00

Turkey Likely to Hike Gas, Electricity Prices Up to 15% as Costs Rise

Turkey Likely to Hike Gas, Electricity Prices Up to 15% as Costs Rise
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Turkish natural gas and power prices are expected to rise by up to 15% next month, four industry sources said, as a global price spike drives up import bills for a country that increasingly relies on gas plants for hydro-generation shortfalls.
 
More costly gas and electricity could keep upward pressure on Turkey's living costs and inflation, which is near a 2.5-year high above 19%. It could also complicate the central bank's plans to ease monetary policy.

The sources, who requested anonymity, said they expected a 15% rise in gas and an 8-15% rise in electricity prices beginning Oct. 1.
 
The government would make any final decision and the energy ministry did not immediately comment on whether hikes were imminent.

Natural gas prices have soared by around 280% in Europe this year and by more than 100% in the United States, pushing up winter fuel bills.
 
Low storage inventories, high demand for gas in Asia, less Russian and liquefied natural gas (LNG) supply to Europe than usual, high carbon prices and outages have led to the spike.
 
Analysts expect prices to remain elevated until 2022 or even 2023.
 
"Due to rising fuel costs, the industry expects a hike in electricity and gas prices. Public authorities are aware of this (necessity)," an energy industry source told Reuters.
 
Turkey is almost fully dependent on imported gas from Russia, Iran and Azerbaijan until at least 2025 when it expects its first gas field to reach volume production.
 
Local consumption is expected to hit 60 billion cubic metres (bcm) this year, almost a fifth higher than earlier estimates as vacant gas plants kicked in to cover shortfalls in hydro power production.
 
Unusually dry conditions since last year decreased the share of hydro in Turkey to its lowest level in at least a decade.
 
The share of dams and rivers in electricity generation, which usually offset spikes in power prices, fell below 20% in the first eight months of this year. A further drop is expected over the next few months, two of the sources said.
 
"Hydro's share is at 10% so far this month, the lowest in a decade," one of the sources at a private electricity producer told Reuters. "Weather forecasts we have suggest a grim winter for hydro, thus electricity bills."
 
Increasing gas and imported coal prices pushed local wholesale power prices up 45% since the beginning of the year, whereas regulated power prices for residential use rose 22%.
 
Turkey regulates gas prices and charges a higher rate for big consumers like power plants. Bills for households that use gas for heating rose 19% this year, compared to 69% for power plants.
 
Two of the sources said Turkey will likely follow up next month's price hikes with further hikes heading into winter.
 
"No government wants to tell its citizens that there'll be serial price hikes. But simple mathematics dictates follow up hikes in gas and electricity prices in the next few months," one of the sources said.
 
Electricity and natural gas make up 4.4% of Turkey's consumer price index. A 15% price hike across the board would increase consumer prices by 0.7 points.