The Competition Authority (Konkurentsiamet) has approved a rise in grid distributor Elering's transmission fee, which will cost the average household around a euro more per month, when it comes into effect next April. The request to increase the fee, for the first time in nearly nine years, came before the surge in electricity prices in the latter months of this year.
"The rising stock exchange price of electricity has sharply increased Elering's costs in compensating physical network losses during the transmission of electricity to consumers, from €12 million to €35 million."
The rise will be passed on to domestic consumers in an increase in bills of around a euro a month per average household, the company said.
Elering does not connect directly to households, but its fee rise will havae a knock-on effect on the costs of distribution networks, and so likely impact on the end-user's bill.
The price hike is to be implemented from April 1 and follows almost nine months of deliberating by the competition authority.
In the last 12 months, Elering says it has purchased approximately 400 GWh of electricity to cover losses related to electricity transmission.
Considering the price of electricity futures transactions in the Estonian price area in 2022, Compensating for losses may next year reach the €50-€60-million-mark, the company added.
Network loss is a physical phenomenon that inevitably occurs during the transmission of electricity, mainly due to the heating-up of power lines and equipment.
While losses account for around three percent of the energy passing through an electricity transmission network, they are also the largest type of cost incurred by the transmission network, it is reported, and surpass the total amount of operating costs by over €10 million in a given new charging period.
The latter includes, inter alia, all costs related to the operation and maintenance of the electricity grid.
Elering board chair Taavi Veskimägi said the company is the largest consumer of electricity in Estonia, purchasing twice as much electricity as its next-nearest competitor.
Veskimägi also expressed confidence in the Competition Authority's analysis over the past nine months.
The last time Elering increased the transmission service fee was in 2013, while this fee fell twice, in 2014 and again in 2017.
The estimate of the one-euro price rise to the average consumer is based on an average family consuming 250 Kwh per month.
Electricity prices have repeatedly smashed records since the fall, reaching an all-time high of €469 per MWh early on in the month. While prices have fallen since then, they are likely to remain volatile, with the inflation coming during winter and at the same time as record natural gas prices have also been posted.
The government has implemented two programs in response, running from October to March next year. One discounts the network connection fee by 50 percent (suppliers will be reimbursed by the state – a similar measure has slashed the natural gas connection fee to zero-ed.) while the other provides support to low income households (defined as those with a gross monthly income lower of €1,125 per month or less).
Editor: Andrew Whyte