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Battered by sky-high electricity prices, Czechs reckon with prospect of energy poverty

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Prague, Czech Republic – Only a year ago, the Czech Republic may not have been an obvious choice for experts and policymakers to study the impact of Russia’s hybrid war against the West.

But as Putin’s invasion of Ukraine nears its first anniversary, the Czech example shows how vulnerable CEE countries remain to Moscow’s energy blackmail, and how individual resilience and government adaptability can help rise to the challenge.

High energy bills put undue strain on Czech households

Czechs may be safely nestled nearly 1,000 km west – for the easternmost of them – from the deadly frontlines of Russia’s aggression against Ukraine, the war still pried into the intimacy of their very own houses, putting the living standards, and pocketbooks, of many of them in jeopardy.

“The increases in energy prices that await us over the coming months will come as a shock to many of you,” Prime Minister Petr Fiala gravely announced in June last year. “The state does not have the money to compensate for this increase in full and to everyone.” In both cases, he wasn’t lying.

Almost nowhere else in Europe have energy and electricity bills risen to fast because of the war, Western sanctions, and Russian retaliation measures. The impact was swift, radical and unforgiving: the first six months of 2022 saw the price of electricity rise by 62% (the highest in the EU), while gas bills rose by 71% (the fourth highest after the Baltic countries). In December, natural gas was 140% more expensive than it was a year earlier, while electricity prices had started to fall in October due to government intervention.

Adjusted with purchasing power, no other country in Europe paid a steeper price for electricity, leading to a sobering drop in households’ real income, and a subsequent decrease in consumption for both gas and electricity. Capital-city dwellers prove no exception, paying Europe’s highest electricity and natural gas prices (in PPS) according to the Household Energy Price Index.

Julie Lesová, a 23-year-old glassmaker from Černošice now living in Prague with her husband and 2-year-old son, is one of them. Due to rising energy prices, she’s been forced, since September, to stop using her glass fusing kiln, an essential piece of machinery used to melt and mould glass into sculptures of her own designs, which also uses up a huge amount of energy.

“Even without using it, my utility bills have doubled compared to last May,” she explains. “As a result, I can’t create new designs, and have to postpone orders from clients,” she says, adding that faced with such a choice, keeping her family’s flat as warm as possible remains a priority compared to the needs of her glassware workshop, located in the old industrial district of Kolbenova, in the north-east of Prague.

Some have rightly pointed out that the Czech Republic’s vulnerability to volatile energy prices is not new and stems, in part, from its large energy-intensive manufacturing sector. Higher prices also pre-date Russia’s invasion of Ukraine in February 2022, and are linked to the collapse, in October 2021, of Bohemia Energy, supplier of over 900,000 consumers at the time of its bankruptcy.

Experts also blame high prices in the Czech Republic on the fact that it purchases energy from the European Energy Exchange, where prices are above-average levels compared with home-produced electricity, itself often exported abroad. High taxes and the lack of blanket forms of assistance are also cited to explain increased prices in a country only faintly reliant on Russian fossil duels (Russian gas accounts for only 10% of the Czech energy mix, mostly made up of nuclear energy and lignite).

Still, across the country, Czech consumers and family households are forced to tighten their belts, save on essential expenses like food, or resort to alternative sources of heating, including the highly polluting but cheaper brown coal. “We see conflicting trends right now,” highlighted Greenpeace Czech Republic, citing “higher coal consumption, but at the same time, a massive investment in renewable energies, heat pumps [and] insulation.”

Hard decisions ahead

Individual consumers, eager to minimise the cost increase but often reluctant to lower their home temperature during winter, are not the only ones struggling to come up with a sound strategy.

While the Czech government’s swift response to Russia’s invasion has in many other respects – humanitarian assistance, military aid, financial and diplomatic support – heaped praise both at home and abroad, its measures to mitigate the impact of higher energy costs have faced a fair amount of criticism and fuelled resentment among some Czechs feeling neglected by their leaders.

In September, the coalition government led by Prime Minister Petr Fiala announced energy price caps for households and small firms. These measures were extended in December to larger companies, which had been complaining – especially after Germany’s controversial massive aid package – of being left at a competitive disadvantage with the rest of Europe.

“Government action has clearly accelerated over the past year as a result of the energy crisis,” notes Jan Klusáček from Za bydlení, an association part of the Platform for Social Housing advocating legislative and regulatory changes to ensure adequate housing for all. “Whether we’re talking about new housing benefits or less bureaucratic red-tape, our work has inspired several decisions made by public authorities in recent months.”

Energy-saving tariffs and various other schemes of government support were indeed introduced, while Czech authorities launched a special website to help people navigate the crisis, and a calculator to determine whether they’re eligible, and to what extent, to state subsidies.

Despite the caps introduced by the government, “prices are still approximately three times higher than before the energy crisis,” warns Vit Jasek, executive director of the Czech Union of Employers’ Associations, representing companies and organisations from the social services sector (healthcare, education, culture, etc.). From schools forced to consider moving classes online to researchers unable to operate their technology and instruments, everyone is affected.

“The owners of these services (i.e. government, regions, municipalities) need to secure enough money to cover the increased costs,” M. Jasek adds, warning of “existential problems” in their ability to carry out their core social activities should authorities fail to address the spike.

“Too little, too late”, was a common tune heard throughout the country, as in many other parts of Europe, and which fuelled several large anti-government protests last year where opportunistic politicking mingled with genuine popular grievances.

Being self-employed, Prague-based glassmaker Julie Lesová is not eligible to government aid for private companies, small or large. “The average temperature at our workshop [which she shares with two woodcraft artisans] is about 10°C now. Having to work with additional layers of clothing or wrapped in a blanket isn’t the most ideal in my line of work,” she points out.

Energy poverty looming threat for most vulnerable

“The most vulnerable groups are low-income households, single-income ones, single parents, pensioners, long-term sick or disabled, as well as young adults and students living in rented apartments,” explains Hedvika Koďousková, an assistant professor at Masaryk University in Brno and co-author of a study on energy poverty in the Czech Republic.

An observation confirmed by a PAQ Research study which found, based on data from the Czech statistical office, that nearly one third of Czech households could fall into poverty due to rising housing and energy expenses. More than half of Czech seniors are at risk of energy poverty, according to local estimates, and those living alone are particularly vulnerable.

On average, Czechs paid 2,500 Kc (100€) more on housing expenses in November 2022 than they did 12 months before. Combined with the cost of food and other basic expenses, Czechs pay about 50% of their income on necessities, and even beyond 65% for low-income households.

From the time spent at home to the quality and efficiency of domestic heating options, Ms. Koďousková points to a range of factors to assess who is most at risk of inflated energy bills. And a four-pillar recipe to shield them or cushion the impact.

“In general, scholars recognise four options to tackle energy poverty: protection against disconnection [from the grid], social benefits, subsidy programs and information. All these policies and measures are present in the Czech Republic, but none of these is fulfilling their potential to address the problem,” she notes.

Case in point, the exceptional state support launched by the government for Czech households where housing costs account for more than 30% of net income. Some 150,000 have applied for and received it, but nearly an additional half a million are still eligible according to People in Need.

Calling for a better and more targeted communication able to break the taboos and overcome the stigma of asking for help, especially from the state, the NGO also set up its own SOS Czechia helpline to help people understand what they might be entitled to.

With rising prices and the bankruptcy of several energy service providers in 2021 representing “a turning point,” Ms. Koďousková from Masaryk University noted “a significant shift”, for the better, in the increased political and media attention given to their impact on vulnerable households. “No one disputes that energy poverty is present today and needs to be tackled,” she assesses.

While the inflation rate could have already reached its peak, the shock-therapy of 2022 may have passed. Its aftereffects are, however, here to linger. “About 60,000 Czechs may today be considered as homeless or living in highly unsuitable lodgings, and an additional 200,000 in the high-risk category” says Jan Klusáček, the expert from Za bydlení. “Only a small rise compared to previous years, but we expect the full impact of the energy crisis to be felt in 2023.”

“Progress has been made”, he admits, “but the government now has to follow through and finish the work,” he adds, citing a range of areas – from municipal housing to socially excluded localities – where a lot of work remains to be done to ensure that, regardless of how much 1 kWh costs, having a roof over one’s head does not become a luxury.

This article is published as part of a project to promote independent digital media in Central and Eastern Europe funded by the National Endowment for Democracy and coordinated by Notes from Poland.

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By Jules Eisenchteter

A journalist based in Prague, Jules Eisenchteter is the co-founder and editor-in-chief of Kafkadesk.