Government maintains cut-price rate for electricity sector employees
Published: 19 August 2007
Earlier in 2007, the Ministry of Economy and Transport (Gazdasági és Közlekedési Minisztérium, GKM [1]) disputed the discounted price of electricity, as a form of extra-wage allowance, for workers in the energy sector (*HU0702029I* [2]). This preferential rate was further endangered by the liberalisation of the industry as of 1 June 2007. Following industrial action in February 2007, a preliminary agreement was signed by the Strike Committee of the Electricity Supply Sector (Villamosenergia-ipari Ágazati Sztrájkbizottság) and the Minister of Economy and Transport, János Kóka.[1] http://www.gkm.hu/[2] www.eurofound.europa.eu/ef/observatories/eurwork/articles/unions-protest-over-plan-to-cut-employee-benefits-in-electricity-and-railway-sectors
In June 2007, representatives of the Ministry of Economy and Transport, employer organisations and trade unions of the electricity sector signed an agreement maintaining the preferential price for employees in the sector after liberalisation of the industry. This followed a series of negotiations and strike action earlier in the year. The agreement defines those entitled to the discounted price and under what conditions, and specifies who covers the cost differential.
Background
Earlier in 2007, the Ministry of Economy and Transport (Gazdasági és Közlekedési Minisztérium, GKM) disputed the discounted price of electricity, as a form of extra-wage allowance, for workers in the energy sector (HU0702029I). This preferential rate was further endangered by the liberalisation of the industry as of 1 June 2007. Following industrial action in February 2007, a preliminary agreement was signed by the Strike Committee of the Electricity Supply Sector (Villamosenergia-ipari Ágazati Sztrájkbizottság) and the Minister of Economy and Transport, János Kóka.
Content of agreement
On 21 June 2007, the final agreement was signed by representatives of GKM, the Employer Association of Electricity Industry Companies (Villamosipari Társaságok Munkaadói Szövetsége, VTMSZ) and the three representative sectoral trade unions forming the Strike Committee: the Trade Union Federation of Electricity Workers (Villamosenergia-ipari Dolgozók Szakszervezeti Szövetsége, VDSZSZ), the Workers’ Union of Mining and Energy (Bánya- és Energiaipari Dolgozók Szakszervezete, BDSZ) and the electricity branch organisation of the Democratic League of Independent Trade Unions (Független Szakszervezetek Demokratikus Ligája, LIGA). The agreement prescribes that trade unions are to prepare an ‘employer list’, in consultation with VTMSZ, which lists employers in the energy sector entitled to provide this extra-wage allowance for their employees. The list should be approved by GKM and updated every six months.
Entitlements
According to the agreement, the following groups of people are entitled to the allowance:
full-time employees in companies or trade unions of the sector, appearing on the employer list; newly hired employees are entitled to the discounted rate after the third month of their employment;
pensioners who at the time of signing the contract are receiving the allowance, or who worked full time in the sector for at least 10 years. If their employment lasted less than 10 years but more than five years, they are entitled to a discounted price for as long as their full-time employment lasted. If employment was at various employers, then the total number of years should be taken into consideration when deciding the duration of the entitlement;
widows of employees, or pensioners, of the sector; if the death of the spouse who had worked in the sector takes place after the signing of the agreement, then the widow will be entitled to the preferential rate for five years after the death.
Conditions
The extra-wage allowance of the preferential rate is to remain tax free. Its value is 37% of the standard consumer price up to a maximum usage of 6,000 kilowatt hours a year. Beyond that, different rates are to be applied for the accrual usage up to a maximum consumption of 15,000 kilowatt hours a year (see table). The discounted rate can be used at a maximum of two locations for as long as the entitlement is valid.
| Levels of consumption (kilowatt hours a year) | Preferential rate (% of standard consumer price) |
|---|---|
| 0–6,000 | 37% |
| 6,000–9,000 | 40% |
| 9,000–12,000 | 50% |
| 12,000–15,000 | 60% |
Responsibility for financing
In the debates on the preferential rate, a crucial issue arose to who pays the rest of the bill; state regulations on the standard consumer price of electricity acknowledged the subsidies as additional cost elements, so ultimately the general public pays for them as consumers. In practice, however, the distribution company that provided the employee’s household with electricity had to bear the cost. This obviously resulted in an uneven distribution of the financial burden across the regional distribution companies.
According to the current agreement, the employer is responsible for financing the discounted rate for active employees. In the case of pensioners who retired before the agreement was signed, the Hungarian Transmission System Operator Company (Magyar Villamosenergia-ipari Átviteli Rendszerirányító, MAVIR) will cover the cost of the preferential price. MAVIR also pays the cost differential for widows of employees and pensioners of the sector receiving electricity at a discounted rate at the time of signing the agreement. However, for spouses of employees or pensioners widowed after 21 June 2007, the former employer of the deceased is responsible for financing the discount.
Orsolya Polyacskó, Institute for Political Science, Hungarian Academy of Sciences
Eurofound recommends citing this publication in the following way.
Eurofound (2007), Government maintains cut-price rate for electricity sector employees, article.
