Minister: Universal electricity price to match average fixed package price
Minister of Entrepreneurship and IT Kristjan Järvan (Isamaa) said that the state's universal electricity service package will cost about the same as the current fixed-price packages.
"Looking at the price forecasts, the fixed price of the universal service will more or less match the fixed price today. People will need to decide whether they even want to switch," Järvan said.
The minister said that the price of the universal service will be around €120 per megawatt-hour.
The coalition agreement prescribes allowing consumers to terminate existing fixed contracts. Several service providers prescribe contractual penalties in such cases. "There are several sides to the contractual penalties issue. We have discussed this matter and details are still being hashed out in terms of the best possible solutions for everyone."
"Our aim is not to dismantle the market economy. The goal of the electricity market reform is preparing for what we see will be a harsh winter. We do not want people to have to suffer the cold. It will be an inconvenience for everyone, while we don't want to leave anyone behind," Järvan said.
The electricity market reform will be made up of two components, a benefit and the universal service. "There is a clear reason why we are going down the path of universal service. Last year's benefits meant the consumer's electricity package made no difference. The state paid for everything over 12 cents per kilowatt-hour. Our solution is more akin to free market economy where the consumer is invested in their choice of energy package. Perhaps the universal service will be the best solution for them and perhaps not, while they will have the opportunity to avoid critical junctions," Järvan said.
The minister described the solutions as the most sensible for the state as it motivates consumers to act sparingly.
"The market price could go in either direction, yielding greater or smaller gains. A sensible profit margin approved by the Competition Authority will be included in the [universal service] price. Profit margins are adjustable, and if you have effective production capacity, you can get a better price and profit that motivates producers to invest in innovation," Järvan said.
He said that risks associated with the reform have to do with its time frame. "We are doing it inside a very tight time frame that has a lot of moving parts that all need to work together. The biggest risk is being late. I sincerely hope that once the toughest time arrives, everything will be operational and streamlined," he said.
For the universal service package to be available from October 1, the bill needs to reach the government in the first weeks of August and the Riigikogu by the end of that month. "It needs to be passed by mid-September at the latest," Järvan suggested.
Minister of Economic Affairs and Communications Riina Sikkut (SDE) said that the reform measures should be temporary. Järvan said that temporary is a relative concept. "These solutions will be needed for as long as the market fails to function," he said.
No time frame will be included in the law. "It will depend on political decisions and the feel for how home consumers are coping and what other measures exist," the minister explained.
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Editor: Marcus Turovski