Determinants of the Relationship between Wholesale and Retail Energy Prices in the Czech Republic

at the international, European, and national levels. Energy prices are
the main determinant of profitability or even the existence of the
industrial sector. So, it is accepted that energy policy aims to ensure
a secure, sustainable, competitive, and affordable energy supply for
households and businesses. However, the recent geopolitical
situation has significantly affected the energy policy of the European
Union, raising concerns about energy security and an energy crisis.
This crisis has had social, economic, and political consequences,
including energy poverty. In this context, it is essential to understand
the determinants of the relationship between wholesale and retail
energy prices. This paper presents a model proposal to be used by the
Czech Energy Regulatory Authority. The model of average retail
prices depends on the type of contract - spot or forward, with the
three-year forward contract having the largest weight on the retail
price. Therefore, our study shows that long-term contracts
significantly impact retail energy prices, highlighting the importance
of regulatory monitoring of market strategies. Methodologically, the
model is based on a multivariate regression analysis solved with the
least absolute deviations and data for the period 2012 to 2023. The
findings of the study contribute to a better understanding of the
complexity of the dynamics of energy prices and support
policymakers while attempting to ensure energy affordability and
sustainability.