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Wednesday 20.03.2019 | Name days: Made, Irbe

MPC crisis: what do Latvian parties promise?

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIn the past year, Economy Ministry’s activities, reviewing the fairness of the mandatory procurement component system and its influence on businesses’ ability to compete, have been poor, as reported by Nekā personīga.

Meanwhile, nearly all political parties have mentioned in their pre-election campaigns proposals for liquidation of fees to Latvenergo’s TEC 2, as well as proposals for more careful inspection measures for companies that make a profit from producing green energy.

As mentioned by the programme, January five years ago began with a major crisis at Liepājas Metalurgs. The company turned to Latvenergo and the Latvian government. The reason for this was a dramatic jump of the size of MPC fee. In 2013, the fee was EUR 13 million for Liepājas Metalurgs. This amount is approximately equal to MPC payments for three previous years combined. Expensive electricity was another in the list of factors that caused the metallurgy giant’s bankruptcy.

On 15 October 2017, Nekā personīga reported for the first time the story about blue containers that had suddenly showed up in multiple locations in Latvia. Those containers were used to fake green energy production to secure state support. Since October, Economy Ministry has inspected only 40 out of all suspicious green energy production companies. MPC permits have been revoked for 26 of those companies, as reported by Nekā personīga.

Half a year after the discovery of fraudulent schemes Economy Ministry formed a work group. Members were supposed to come up with proposals to change MPC system by August this year. The government had reviewed those proposals in the middle of August. It was decided that the work group is to work on proposals some more until September. Now it is clear that this problem will be for the next Saeima and government to work on, adds the programme.

New Unity’s Economy Minister Arvils Ašeradens offers a five-step plan to be realized in three years. He promises to introduce a subsidized electricity tax for two years. After that the minister promises to introduce new requirements for biogas stations, reform power output fees, and issue green energy certificates to electricity producers. The main objective, he said, is avoiding expensive court proceedings.

Ašeradens: «While in the previous year it was EUR 260 million, MPC balance may be around EUR 40 – 50 million. This is what we have presented. And even this volume would be procured based on market rules. There are two scenarios – green certificate scenario and the so-called feed in tariffs. The first scenario is similar to bioenergy. The second one is popular in Europe. With this scenario, producers receive relatively small subsidies for the energy they can sell. Three years… We in the work group have studied the alternative. If we put an end to it suddenly, we risk subjecting the country to expensive court procedures.»

Concord, KPV LV and New Conservative Party have the most radical views in relation to MPC recipients. Concord and KPV LV believe money paid so far should be considered illegal state support, which was not previously approved by the European Commission. With that, they believe this money should be enforced from businesses, the programme reports.

Didzis Šmits (KPV LV economy minister candidate): «The government’s first step should be informing MPC recipients in writing that support paid to them from 2007 to 24 April 2014 was illegal. Furthermore, looking at EU legislation, the country has no other way than to enforce this money from businesses.»

Concord’s economy minister candidate Ivars Zariņš believes Economy Ministry only protects producers of expensive electricity. He believes the ministry should organize inspections more actively and change the size of support fees.

New Conservative party proposes employing a practice similar to the one used for European funds. «Money will be requested back if evidence is found that businesses did not work honestly. On top of that, it would be best to cease supporting Latvenergo TEC 2 power plant.»

Gatis Eglītis (NCP): «The government has made a decision for us as consumers to continue paying EUR 689 million state support to TEC 2 Latvenergo in the next 11 months. […] This support should be ceased immediately. One other thing worth mentioning – we need a massive revision of costs of Sadales tīkls and Augstspriegumu tīkls. Their component is very large in MPC – 30%. It is also the largest one in Baltic States.»

Eduards Smiltēns (Latvian Association of Regions) believes MPC should be cancelled, and this should be done in the next two years.

«This system should be ended quickly, but using many different tools, including audits, transfer of gas cogeneration liabilities to the state, introduction of a subsidized electricity tax, and other activities to reduce MPC fees to an absolute minimum or liquidate it entirely,» says Smiltēns.

Daniels Pavļuts (Attīstībai/Par!): «Determining dishonest businessmen and ceasing payments of subsidies to them is a top priority. If they are able to work in accordance with market rules, let them. But we should not have to pay subsidies to them. Next is reviewing the size of subsidies. Finally there is Latvenergo, which receives payments for large gas stations. Latvenergo may drop other liabilities in the future. Latvenergo is able to cover those costs using its revenue. This would be very helpful.»

The National Alliance has a calmer proposal. Members of the party propose ceasing payments to TEC2. The party does believe the government’s existing plan is sufficient, the programme reports.

Meanwhile, Union of Greens and Farmers criticizes Unity’s minister for supporting electricity producers too much. The party believes that increasing control for businessmen would help liquidate dishonest businesses.

While politicians are planning MPC reforms, investigators are studying what has happened since 2007. The prosecutor general’s office has received several applications detailing possible violations with green energy production. Unfortunately, none of those applications remain in the prosecutor’s office – all of them have been forwarded to the State Police. As Nekā personīga has confirmed – Organized Crime Prevention Office has commenced several criminal processes and one inspection in relation to MPC. Police does not provide more detailed comments on the investigation.

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