Transmission fee hike canceled

Cross-section of the Estlink2 undersea power cable.
Cross-section of the Estlink2 undersea power cable. Source: Elering

Estonia will not be hiking the power transmission fee despite electricity price advance. Grid operator Elering turned to the Competition Authority to propose retaining recent transmission fees despite higher price of electricity and plans to cover the cost using other revenue. The watchdog has granted the system operator's request.

"To avoid transmission fee hikes due to transmission losses in the conditions of already rapid inflation, Elering has proposed using overload charge revenue to cover costs associated with having to pay for transmission losses," Elering CEO Taavi Veskimägi told ERR.

"According to the proposal, overload charge revenue would help overcome the price difference between expenses covered by the transmission fee and the actual cost.

Elering later said that the Competition Authority has approved its proposal to cancel the transmission fee hike. "Elering will be able to use overload charge revenue to cover grid expenses in 2022," spokesperson Ain Köster said.

The grid operator charges an overload fee from the market in situations where there are irreconcilable price differences in neighboring countries because there are not enough energy links to level the price. The charge is applied in the case of Finland and Latvia the market price areas of which border Estonia's.

Transmission losses have physical reasons and because the price of electricity has grown, so have Elering's expenses on compensating for it.

"Recently high electricity prices have hiked what Elering pays for electricity on the market to compensate for physical transmission losses, while it has also hiked revenue that comes from the price difference between Estonia and Finland," Veskimägi said.

Veskimägi explained that overload charge rules have been provided by the European Union.

"They are not specific to Elering or Estonia. They're the same everywhere in Europe," the head of Elering said, adding that overload charge money can be used to invest in cross-border transmission links or to level price differences inside and between countries.

Asked whether the transmission fee could be lowered, Director General of the Competition Authority Märt Ots said that depends on Elering's capacity and requires a proposal from the grid operator.

Estonian legislation gives the competition watchdog powers to hike the price, while the opposite needs to be decided by the company, he suggested, adding that any decision to alter transmission fees would take months to process.

Elering's annual report reveals that it received €66 million in overload charges and had reserves of €125 million in 2021.

Veskimägi said that Elering will continue to invest most of the money in cross-border energy links, such as reconstruction of power lines that cross into Latvia or the planned Estlink3 connection between Estonia and Finland.

"The significance of Estlink3 lies in leveling the price of electricity in Estonia and Finland. The price difference comes down to this "bottleneck" where the existing Estlink cables cannot facilitate enough cheap Nordic power flowing to Estonia. Creating a third link would help the situation," Veskimägi said.


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Editor: Marcus Turovski

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