As from May 1, 2007, new natural gas tariffs will be enforced in compliance with the resolution of March 28, 2007 by the Council of the Public Utility Commission. The tariffs will increase by approximately 17% for customers consuming up to 25 000 m3 of natural gas (mostly stoves and heating), whereas for customers consuming more than 25 000 m3 of natural gas per year, the increase will be 28% - 34% depending on the prices of heavy fuel oil and annual amount of natural gas consumption. In particular, the applied tariffs depend on the average value of heavy fuel oil in a period of six months and, with changes of this value, tariffs are applied accordingly. When previously approving the project, it was predicted that the value of heavy fuel oil would be up to 260 USD/t (within 10 USD), and with such value the increase of tariffs would be 23% - 34% depending on natural gas consumption. Considering that the price of heavy fuel oil decreased, in compliance with the methods of tariff setting for customers with gas consumption up to 25 000 m3 per year, as from May 1 the tariffs approved by the PUC, compliant with heavy fuel oil value up to 250 USD/t, will be applied, thus the increase of tariffs will be approximately 17%, whereas for other customers - 28% - 34% depending on the prices of heavy fuel oil and natural gas consumption. The JSC “Latvijas Gāze” submitted a project on increasing tariffs in January 2007, because as from January 1 gas purchase price for the JSC “Latvijas Gāze” increased by 50%. The tariff project envisaged an increase of tariffs by 38% - 40%, but the PUC lowered the increase to 23% - 32%. Considering the noticeable increase of purchase price and delayed and insufficient approval of tariffs, the JSC “Latvijas Gāze” will not be able to implement all desirable investments in modernization of infrastructure and improvement of gas supply stability, as well as to gain satisfactory profit. Due to the increase of tariffs, the average monthly payments for households using natural gas in stoves will increase by LVL 0.18, whereas for households using natural gas in heating - by LVL 5.70. The price of natural gas is pegged to the price of heavy fuel oil (with 1% sulphur content) at the oil products exchange FOB ARA (free on board Amsterdam, Rotterdam, Antwerp). The price of heavy fuel oil changing (the average of last six months is taken into account), the PUC-approved tariffs are applied accordingly. For customers with gas consumption less than 25 000 m3 per year the tariffs are changes on January 1 and July 1 every year, whereas for customers with gas consumption more than 25 000 m3 per year the tariffs are changed monthly. If the prices of heavy fuel decrease, so do the tariffs, and vice versa. Commercial proxy Vinsents Makaris T +371 7369144 vinsents.makaris@lg.lv