Europe Eyes with Envy Hungary's Energy Prices

Household electricity and natural gas prices in Hungary are consistently the lowest in Europe. The utility cost cut scheme has proved its worth over the last ten years and the government will introduce innovative measures next year in order to maintain it. Household utility tariffs will remain unchanged.

ALTEO Group’s new 8 megawatt (MW) battery electricity storage facility with a nominal capacity of 16 megawatt hours (MWh), providing almost one fifth of all domestic capacity, in the Gyor Industrial Park on the day of inauguration, October 4, 2024 (Photo: MTI/Csaba Krizsan)

The Hungarian government's utility cost reduction scheme continued to play a key role in helping households manage their energy costs. The scheme, introduced ten years ago, aims to ensure that households can afford energy while reducing the impact of market fluctuations.

According to the latest data from November, Hungarian households had the lowest electricity and natural gas prices. In the eleventh month of the year alone, household electricity prices in Europe increased by two percent, although the price of natural gas remained mostly unchanged, according to a report by VaasaETT. In the list comparing price levels in European capitals, Budapest has remained the most affordable in both categories. It is worth noting that, although the data are for the capital, the same prices apply across the Hungary.

Second best in terms of utility-costs-to-income ratio

It is also noteworthy that Budapest ranks second best among two-earner households with average income and consumption, modeled by the Hungarian Energy and Utilities Regulatory Office (MEKH), with only Luxembourg ahead in terms of the ratio of utility costs to income.

Comparing this with the first month of 2024, it is only the latter ranking that has changed: in January, the average household in London was ahead of the average household in Budapest.

In other words, the Hungarian population did not suffer additional energy costs this year either, while changes in the international energy market, geopolitical tensions and the availability of energy sources  had an impact on energy prices throughout the EU.

In addition, even those who consume more than the average have not seen their gas and electricity tariffs skyrocket. Under the regulation, which came into effect back in August 2022, they pay slightly more – assuming they can afford higher costs being larger consumers – but even this tariff is the fourth lowest in the ranking for both gas and electricity.

Despite its unquestionable results, the utility cost reduction policy has been criticized even in 2024, saying that it is unsustainable in the long term and that it imposes a significant burden on public utility providers and the state through the budget. However, the government's response is clear:

ensuring affordable electricity and gas for the population is vital, especially in times of economic difficulties.

In addition, the government intends to place greater emphasis on reducing household energy consumption, for example by encouraging the use of renewable energy sources and expanding energy efficiency programs. In order to reduce energy consumption, the government has also promoted the roll-out of digital meters, which contribute to increasing the conscious use of energy.

Support system restructured

This year again, the government's utility protection fund, set up during the energy crisis, has played a major role in keeping electricity and gas prices down. This has been restructured in the 2025 budget, with the fund itself being abolished and three ministries becoming responsible for sub-tasks (corporate tax will be the source of funding).

• The energy ministry can use 800 billion forints to  mitigate the effects of world market price increases in household prices.
• The finance ministry  can provide compensation to public institutions using 253.2 billion forints.
• The construction and transportation ministry contribute up to 37 billion forints to the energy costs incurred by public transportation services if world market prices rise too high.

In addition to the general public, the government also supports micro-enterprises, as from January new ones can return to the universal service that provides discounted electricity prices. Of the 860 thousand micro-businesses operating in Hungary, approximately 400 thousand are registered in residential properties, so they pay reduced household price for electricity. Another 120 thousand micro-businesse enterprises currently buy electricity at non-discounted prices.