The JSC “Latvijas Gāze” has submitted its tariff project for review at the PUC

The Joint Stock Company “Latvijas Gāze” has submitted to the Public Utility
Commission a new tariff project. An increase of tariffs by 57%-71% for
households and customers with natural gas consumption up to 25 000 m3 and by
24%-36% for industrial customers is requested in the project. Households have a
greater increase because they are being applied tariffs at lower heavy fuel oil
quotation than industrial customers, 310 USD/t and 400 USD/t respectively. It
is requested to apply the raised tariffs from July 1, 2008. Such increase is
expected if the heavy fuel oil prices remain at the level of 500 USD/t. If in
July the heavy fuel oil prices of previous six months have fallen, the
predicted increase will diminish, or the contrary. 

As of 2008, the natural gas supply prices from Russia have been equalized with
the average market prices of the European Union. However, much significant is
the impact of the rapidly and globally growing prices of oil and its products,
which the natural gas purchase price is pegged to. About 80% of the costs of
the tariffs currently in force is the purchase price. 

If in January of the year 2007 the average heavy fuel oil price of previous six
months was approximately 275 USD/t, then in April 2008 it rapidly approached
the mark of 500 USD/t. The oil price at the beginning of 2007 was approximately
50 USD/barrel, but in 2008 the price exceeded 110 USD/barrel. Under the
influence of the oil market, the natural gas prices have grown throughout
Europe. However, despite the expected tariff increase, the natural gas price in
Latvia will retain competitiveness with both other European countries and other
energy resources in Latvia. 

The rapid increase of tariffs for households is influenced not only by the high
prices of oil products and the different heavy fuel oil quotations applied to
the tariffs currently effective, but also the growing costs of distribution
services, affected by the high inflation, the increasing system maintenance
costs and the necessity to begin replacement of meters, which will require
considerable investments for several years. 

The project envisages that customers will not have to pay the subscription fee
anymore and the respective costs will be included in the tariff. 

Vinsents Makaris, Commercial representative of the JSC “Latvijas Gāze”