Hungary mulls changes to business power contracts after price falls

BUDAPEST, June 15 (Reuters) - Hungarys government plans to review and possibly intervene into long-term power contracts agreed by companies last year when electricity prices were much higher, state news agency MTI cited Economic Development Minister Marton Nagy as saying.

Nagy was cited as saying the average fixed price in one-year and two-year power contracts held by companies in Hungary was 250 euros per megawatt hour (MWh), compared with current levels of around 100 euros per MWh on power exchanges.

Nagy, the architect of several unconventional economic policies launched by Prime Minister Viktor Orban, including price caps on various goods, said the high fixed prices created a \“distortion\” in the Hungarian economy.

A spokesperson for the Hungarian Energy Traders Association had no immediate comment on the plans.

Nagy said the move was aimed at staving off a protracted downturn and sticky price growth in Hungary, which has the European Unions highest inflation rate at more than 20%, while the economy remained in a technical recession in the first quarter.

Hungarys headline inflation fell more than expected to 21.5% year-on-year in May, easing for a fourth straight month and keeping a path open for the central bank to further unwind some of its sharp interest rate hikes of the past two years.

Nagy said the government would unveil decisions on the matter next week.

The announcement follows a call by the Hungarian Chamber of Commerce and Industry earlier this week, which said the recent falls in power prices could affect some 60,000 small businesses, a third of which signed contracts at high prices last year.

The body called on Orbans government to intervene in fixed price contracts where the average cost of electricity exceeds 265 euros per MWh.