Uncertainty about the approach of the Czech government to power market liberalization could threaten future investment in the sector, Dow Jones reports. Although reforms are imminent, some key details remain unclear.

The government is preparing an energy law which it claims will be in place by 2001. A new, independent power sector regulator is promised by the end of 2002.

The market is then due to be opened to competition between 2002 and 2003. However it is still not certain if competition will be restricted to participants in the domestic market or whether it will also be opened to international companies.

Several international companies, including Vattenfall, Bayernwerk, RWE, National Power and the Eastern Group have invested in distribution companies and small generators in the Czech Republic recently. Most have viewed these investments over the long term, but with the uncertainly over the direction of reform, it remains difficult to predict how valuable such investments will prove to be.

Foreign investors have already bought around 11 per cent of the electricity sector. The government is due to produce a privatization plan around the end of October outlining the sale of its 48 per cent stake in the country’s eight distribution companies. It also intends to privatize the grid operator and power generator, CEZ, in which it holds a 69 per cent stake.

CEZ itself is trying to sell some of its generation assets. An attempt to sell the Tusimice coal-fired station in the northwest of the country failed earlier in the year. The company plans to offer another coal-fired plant called Hodinin on the Austrian border before the end of the year and may also offer Tusimice again.

It is not clear whether CEZ will be permitted to bid for the distribution companies when they are offered for sale. Meanwhile power consumption in the country is falling at a rate of 1-2 per cent per annum as the country suffers under an economic recession.

Consumption could be hit further by planned prices rises, due to be introduced before the end of 2002. Domestic electricity prices are subsidised and around 40 per cent lower than industrial tariffs. However with the Czech Republic bidding to join the European Union (EU), the government will have to eliminate such subsidies and bring the electricity sector in line with EU standards.