The cost of free public transport--introduced on 1 March 2020--has been estimated by the government at €41m euros per year.  Photo: Matic Zorman

The cost of free public transport--introduced on 1 March 2020--has been estimated by the government at €41m euros per year.  Photo: Matic Zorman

The soaring energy prices since the beginning of 2022 will increase the public transport bill for the Luxembourg government. The latter will cover this increase with various public transport services.

The cost of free public transport--introduced on 1 March 2020--has been estimated by the government at €41m per year. This figure corresponds to the loss of annual fare revenue recorded since its introduction and does not include any operational costs (which are much higher) for public transport.

With the surge in energy and fuel prices seen in recent months, this operational cost will rise in 2022 and the state will have to compensate for a large part of the increase.

For the RGTR--the largest bus network in Luxembourg--“the increase generated by the rise in energy prices in 2022 will amount to 5% of the operating cost,” says Alex Kies, director of the public transport administration. These five percents represent the impact on the first half of this year only. The operating cost of the RGTRs in 2021 was around €280m. The bill at the end of the year could therefore exceed by tens of millions of euros the amount budgeted.

The CFL contract is coming to an end

While the RGTR buses still run mainly on fuel (10% to 12% of the fleet is electric, the objective being 50% by 2025), the tram and train run on electricity.

When Enovos, the main supplier of electricity and gas in Luxembourg, terminated its contract (at a fixed rate), Luxtram, the public limited company that manages the tramway, was forced to sign a new contract with less advantageous conditions. As a result, if electricity “was estimated at 8% of the operating cost in 2021, it should be at 25% by the end of this year, according to our estimates,” explains André Von der Marck, Luxtram's managing director. This percentage should be seen in the context of a much smaller budget than that of the RGTR (this year it will exceed the €12m mark for the first time). But if savings have not been generated elsewhere, the shareholders (i.e. the State and the City of Luxembourg) will have to compensate for this increase.

As far as CFL (94% of which is owned by the State) is concerned, the good news is that the national railway company in Luxembourg is not currently feeling any impact from the rise in electricity prices seen in recent months. In 2022, it is still covered by a multi-annual agreement signed with Enovos.

The bad news, however, is that this contract expires at the end of the year and the market will therefore have to be reconsulted (this will also be the case for Luxtram). And if the new call for tenders is prepared, it will certainly not result in the same conditions as the previous agreement.

Energy also affects the wage bill

At a time when the state budget for 2023 is being negotiated behind the scenes and the mobility ministry needs resources to implement the many measures recommended in these increases in energy prices and the additional costs they generate for public transport are not trivial.

Moreover, they also have an indirect impact on the salaries of many public transport employees, pushing up the indexation of these salaries. In this sector, the wage bill generally represents between 50% and 60% of operating costs. For example, for the RGTR, each additional indexation corresponds to an increase in its wage bill of more or less 1% of its annual operating costs.

This story was first published in French on . It has been translated and edited for Delano.