Opposition calling on government to help ease electricity prices

Session Hall at the Riigikogu.
Session Hall at the Riigikogu. Source: Ken Mürk/ERR

Opposition parties are calling on the government to help mitigate the effects of rising electricity prices after new records were set several times last week.

Last week, the government has said it does not have plans to control rising prices. Both Isamaa and the Social Democratic Party (SDE) initiated bills on Monday to lower the price of electricity for consumers.

If these were passed, consumers would not have to pay a fee for renewable energy in 2022. Additionally, excise duty on electricity would remain at today's rate.

Urmas Reinsalu (Isamaa), chairman of the special committee on state budget control, expects the government to have a concrete plan for resolving the situation next week.

"The state budget will be presented by the end of September, so we are waiting for clear answers," he told ETV's current affairs show "Aktuaalne kaamera" on Monday. The issue will be discussed as one of national important next week.

Environment minister Tõnis Mölder (Center) said the state budget has received almost 2.5 times more money from the carbon quota than forecasted this year, which would help cover the costs.

He said freezing excise duty could be implemented quickly.

"The other side is that the law will allow this money to be returned to middle- and low-income households. One mechanism could be to compensate these people in full for the renewable energy fee, which could then reduce their electricity bill by around 7 percent," Mölder said.

He said measures and their implementation will be discussed during budget negotiations over the coming weeks.

The price of electricity is not forecast to fall in the coming months, with consumers likely looking at a considerably higher bill for September. Prices are rising across Europe.

The reasons for this include a bad summer for renewables and rising consumption. The price of coal has tripled, the price of natural gas has grown 2.5 times and the price of CO2 quota almost doubled over the past year.

SDE: The state cannot sit on its hands now

SDE initiated two bills on Monday, the first would cancel the more than fourfold increase in the electricity excise duty scheduled for next spring, while the second would completely exempt consumers from the renewable energy fee next year.

"The state cannot sit on its hands now, but must protect Estonian consumers and the economy. The state cannot regulate the the exchange tariff, but it can influence the components of the electricity price that are under the control of the state," SDE MP Jevgeni Ossinovski said, explaining that these are primarily the excise duty and the renewable energy fee. 

Party chairman Indrek Saar said the first bill would cancel the 4.47-fold increase in the electricity excise duty due on May 1, 2022.

"Our goal is to stem the undue increase in electricity prices. The record high price of electricity is burdening people now," Saar said.

The amendment would keep excise duty on electricity at today's level, which has been in force since April 30, 2020, meaning that from May next year, an excise duty of €1 per one megawatt-hour of electricity will continue to apply.

The second proposal is for the government to compensate the transmission system operator Elering in full for next year's renewable energy subsidies, as a result of which consumers would be completely exempted from the obligation to pay a renewable energy fee.

Ossinovski said the state must assume the burden of financing the subsidies because the high price of electricity is significantly raising fiscal receipts.

"There will be significant increases in both VAT and quota revenue, by more than €200 million in total," the MP said.

Isamaa: It is time to act 

Isamaa initiated an amendment in parliament seeking the abolition of renewable energy charges for consumers. Renewable energy fees for producers would be covered by a state budget allocation from the revenue of CO2 emission quotas, spokespeople for the party said.

MP Urmas Reinsalu said government parties cannot wait in the current situation.

"The coalition must establish concrete positions. It is time to act and prevent a sharp rise in prices," Reinsalu said, adding that the manyfold increase in electricity prices will deal a painful blow to all Estonian people and companies.

In addition, Isamaa's bill provides for the initiation of the draft 2022 State Budget Act so that its revenues do not provide for an increase in the current rates of fuel and electricity excise duties.

Businesses call for postponement of excise duty hike

The Estonian Employers Confederation and the Estonian Chamber of Commerce and Industry are calling on the government to keep the excise duty rate on diesel, natural gas and other fuels, as well as electricity at the current level, meaning that the scheduled switch to higher excise duty rates from May 2022 would be waived.

In a letter to Prime Minister Kaja Kallas (Reform), they propose postponing changes to the excise duty rates on fuels and electricity for at least a couple of years.

The organizations argue an increase in the excise duties on fuels and electricity will reduce the international competitiveness of Estonian companies, which in turn will negatively affect their exports and reduce their investment capacity.

The European Union is also discussing changes related to excise duties that will also affect Estonia. "Therefore, it is not reasonable for Estonia to raise excise duty rates on fuels and electricity on its own at the moment," they wrote.

Under a legislative amendment that stepped into force from May 2020, amid the first wave of the coronavirus crisis, lower excise duty rates were introduced in Estonia temporarily from May 1, 2020 to April 30, 2022.

These were applied to diesel, special purpose diesel, electricity, natural gas, liquefied petroleum gas, motor natural gas, liquefied motor natural gas, light and heavy fuel oil and shale fuel oil. 


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Editor: Helen Wright

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