Major natural gas consumers appeal to prime minister for price cap

The largest natural gas and LNG consumers in Estonia have petitioned Prime Minister Kaja Kallas (Reform) to cap prices at €49 per MWh and/or provide compensation if this is exceeded.
The largest natural gas and LNG consumers in Estonia have petitioned Prime Minister Kaja Kallas (Reform) to cap prices at €49 per MWh and/or provide compensation if this is exceeded. Source: Eesti Gaas

The major natural gas consumers in Estonia have petitioned the government to set a price cap on consumption.

The major consumers, who together account for over three-quarters of the total industrial consumption, want natural gas prices, and also those of liquefied natural gas (LNG) to have a ceiling of €49 per MWh.

The idea of capping natural gas prices for both business and private consumers has already been raised as a potential additional support measure.

Natural gas has seen record prices in recent months and with no sign of abating, joining electricity, district heating and vehicle fuel, which have seen the same.

Four organizations, with between them account for more than 75 percent of gas consumption: The Estonian Gas Association (Gaasiliit), the Association of Estonian Food Industry (Toiduliit), the Association of Construction Material Producers of Estonia (EETL) and the Association of the Association of Estonian Printing and Packaging Industry (Eesti Trüki- ja Pakenditööstuse Liit) addressed Prime Minister Kaja Kallas in a letter.

In addition to the price cap, the organizations have also asked for a change in the official definition of energy-intensive companies.

ERR has seen a copy of the letter, which stated that: "It is obvious that the situation has escalated and prices have become even higher, which is why we believe that stronger intervention by the government … to compensate the price of both private and legal entities is inevitable."

The imposition of a price cap would not mean that natural gas and LNG prices would not exceed that level, but simply that if it did, consumers would be compensated between 50 and 100 percent of the price, over the period January to May 1.

Natural gas prices are at present higher than the €49-per-MWh, ERR reports.

So far, the government has slashed the network connection fee for natural gas to zero, which is likely to positively impact larger consumers the most. LNG connection fees still apply, however, and are on average €10 per MWh higher than those of natural gas, meaning the applicants want the zero fee to apply to this category also.

In addition, the applicants want the definition of an energy-intensive company to be altered. 

At present, the definition applies to businesses with an average gas consumption intensity of at least 13 percent. 

The letter states that currently, five or six legal entities qualify as this, though about 2,000 companies consume natural gas in the course of their business – in other words they would want the threshold lowered – to 3 percent, the letter states.

Under the relevant EU directive, a Member State can exempt energy-intensive companies from excise duty rates.

An additional measure sees low income consumers compensated by up to 80 percent of all energy bills, inclulding natural gas, though this must be applied for via local government.

Revenue from VAT should be used to alleviate the high energy prices, and all consumers should be viably discounted to the tune of 70-90 percent, which would cost between €39 and €59 million, in this way.

The natural gas consumption of the entire industrial sector in 2020 was approximately one terawatt-hour (TWh), with the food and beverage sector accounting for about a third of this, the paper and printing sector for about a quarter, and construction materials producers about 20 percent.

The letter also sets out a sliding scale of costs in relation to rebate, over a four-period, from 50 percent (which the organizations say would cost €49.5 million) to 100 percent (which would cost €98.9 million, they say).

The costs are calculated according to the prices of the Title Transfer Facility (TTF) gas exchange as of January 12, plus Elering's consumption statistics last year.


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Editor: Andrew Whyte

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