This is why Orbán always wins: we explain Hungary’s unique utility price protection scheme

Political experts agree that the so-called utility price protection scheme is one of PM Orbán’s most effective innovations, contributing to his landslide victories in the general elections. But how does the system work, and how did Fidesz modify it last year, following the energy crisis?

PM Orbán’s most successful political product

Péter Magyari explained the system’s operation method in a detailed article on Válasz Online. He said when he tried to explain the system to a German MP, he could not understand what utility price reduction meant. When Mr Magyari told him that service providers and real estate managers must show consumers how much money they saved thanks to the system every month, he called that brilliant. But later, he added that such a system could not be feasible in Germany.

• No utility fee in a small Hungarian village – HERE is how.

Orbán’s Fidesz introduced the scheme in 2013, and it has become one of the most successful political products of the ruling party. The system helped the nationalisation of the Hungarian energy sector (Hungarian service providers should not rip off the consumers, Orbán stressed at that time) and Fidesz to win four consecutive supermajorities. The Hungarian opposition was speechless for once. They only came up with demands regarding the system’s expansion.

Read also:

• Government committed to maintaining cheap utility prices in 2023 – Read more HERE
• PM Orbán announced when Hungary’s economy would start to grow again

Immense profits

The government reduced electricity, gas and water prices in 2013 and froze their costs at that level in November 2013, months before the 2014 general elections. The prices did not change until 2022. The system concerned everybody regardless of their income. In 2010, when the Socialist-Liberal government lost the elections, people spent 25% of their monthly expenditures on utilities. In 2013, that rate went below 20%. How was the system sustainable?

Thanks to the global energy price decrease. In 2016, 2017 and 2018, the Hungarian service providers bought electricity and gas cheaper on the market than the reduced price was. Thus, E.ON started an ads campaign saying they would give energy cheaper than the government-fixed price. As a result, the government attacked the German company, and they terminated the campaign. In 2017, European gas prices were so low that the state-owned MVM reaped an immense profit, which the government distributed as utility bonds in the 2018 parliamentary election campaign. In the first nine years, the state budget was in balance, concerning the utility price protection scheme.