New fixed electricity contracts could see prices increasing 100 percent

An electricity pylon.
An electricity pylon. Source: Siim Lõvi /ERR

People with expiring fixed price electricity contracts could be looking at price increases of up to 100 percent when the new year begins.

A client of Eesti Energia, who has been on a 12-month fixed price electricity contract, received a new offer from the provider, in which the price of electricity nearly doubles - from €0.683 per kWh to €0.126 per kWh (both without VAT).

The longer the contract period, the cheaper the price ends up being, Eesti Energia spokesperson Priit Luts told ERR. "The clients who signed a fixed price contract a year ago have received electricity at a price 30 percent cheaper than the market price. The increase in electricity prices, which already hit clients on market price contracts will now reach those who fixated a price in the past, but are now starting a new contract period. The rate of the increase depends on the earlier price," Luts said.

The state-owned company energy group spokesperson said Eesti Energia provides some 100,000 clients new offers each period. "We would never change fixed price contracts unilaterally, they make up 60 percent of our clients," Luts said.

An unavoidable price increase

An open market and the price increase of electricity has put even electricity sellers in a complicated situation, in which selling electricity at current prices would mean a significant economic blow to the companies, Luts said.

"Price increases have affected all electricity providers and have raised the price we can offer clients. It is a complicated task of risk mitigation, meaning locking down the price using financial instruments. If the price of electricity increases on the market, electricity sellers will not earn much more, because costs will also go up," the Eesti Energia representative said.

He noted that high electricity prices are not in the interests of electricity sellers. "We would prefer a lower and more stable price level and are working toward that," Luts said.

He said there are several reasons behind the price increases. "Demand for electricity has been very high in the start of the year, when it was cold, and in the summer, when electricity was used for cooling. It affected the level of hydro-reservoirs in the Nordic countries. The economic environment is also active - consumption was up 6 percent from last year in the third quarter. Colder weather and the heating period will increase consumption even more," Luts said.

The Eesti Energia spokesperson said prices could be lowered with more renewable energy production. The current production deficit means that gas, coal and reserve power plants must also produce electricity, but their costs are higher, both due to the higher price of CO2 and the increased price of gas.

"The prices of electricity on the market could be lowered if wind farms, solar farms, hydro power plants with minimal production costs could produce electricity. The capabilities of renewable energy are at full steam today. Unfortunately, that is not enough. The problem is not about there not being enough wind or sun, we just have too few wind and solar farms in our region. Estonia needs off-shore wind farms in addition to regular wind farms on the mainland," Luts said.

On Tuesday, the average daily price of electricity in the Estonian region of the Nord Pool energy market will reach a record €469, just a day after setting the record at €290.


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Editor: Kristjan Kallaste

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