Two bills aimed at reforming the electricity market passed their first Riigikogu reading Wednesday evening in a special session convened for the purpose. The bills, should they enter law, have both the long-term goal of moving towards renewables electricity only, and aim to resolve the immediate issue of soaring electricity prices, by providing a universal, guaranteed service.
Spokespersons for all five parties seem to be more-or-less unanimous on the need to reform the electricity market, though some questioned why the measures were not being applied to other energy sources, and were only being applied to domestic customers and not business.
In an off-schedule Riigikogu sitting that lasted until late Wednesday evening, the bill amending the Electricity Market Act and the Competition Act, plus the bill amending the Energy Economy Organization Act, passed their first reading,
The two bills aim to impose 100 percent renewable electricity consumption in Estonia.
The current proportion is 40 percent.
At the same time, the first bill, amending the Electricity Market Act and the Competition Act, popularly known as the electricity market reform bill, should it pass into law, would allow for the sale of electricity as a universal service, in response to the record-breaking electricity prices of recent months.
IT and foreign trade minister Kristjan Järvan (Isamaa) has expressed a hope that the bill would be adopted as a law in the Riigikogu as early as mid-September, which would require it passing its second and third readings. Significant amendments can be made to a bill between the first and second reading.
During debating in the Riigikogu (see gallery), former economic affairs minister Taavi Aas (Center), former environment minister Rene Kokk (EKRE), Isamaa leader Helir-Valdor Seeder, Reform Party chief whip Mart Võrklaev, and former Social Democrats (SDE) leader Indrek Saar presented their opinions.
Aas called for measures such as those put in place last winter, by which time energy prices were already soaring, should be implemented right away, for natural gas and district heating as well as electricity, adding that not only this consideration but also that of business – the universal service applies to domestic consumers – has been overlooked.
Kokk concurred about business, calling the approach to the service, in this respect, completely skewed and one which will result in unemployment, a reduced tax base and a damaged private sector.
Kokk also called for leaving the controversial Nord Pool exchange, the marketplace which has recently quoted hourly electricity prices both as high as €4,000 per MWh, and as low as a few euros per MWh for the same energy, with immediate effect.
Seeder also called for taking natural gas and district heating into the picture, adding that these had, however, been legislated for already with no need for a change.
Creating additional generation capacity was a better long-term solution, the Isamaa leader added, though state intervention along the lines of the bill is justifiable in the present case, he said.
Võrklaev noted the bill concerns a four-year, temporary measure, to offer relief to domestic consumers in the electricity price crisis only until cheaper renewable energy solutions are available on the market again, and when the price of electricity as a whole has dropped.
Võrklaev noted that last year's heating season, traditionally from October 1 to April 1, brought a €50-per-MWh discount in any case, regardless of contract, with similar measures put in place for natural gas and district heating.
Saar called the current situation tough and noted that the assumption that the universal service price of electricity will be below the current rate for those on a fixed contract hinges on several variables, including the level the Competition Authority (Konkurentsiamet) sets once the bill is enshrined into law.
The state will in any case provide support on electricity prices, he said.
Amendments to the bill must be submitted by Monday, September 5, ahead of its second reading.
Only minor amendments such as correcting typos may be inserted between a bill's second and third reading; a bill requires an overall majority at the 101-seat Riigikogu to pass, before being sent to the head of state for his assent.
Electricity market reform's main goals
The universal service is not intended to provide either free or very cheap electricity, but is rather a selective measure by the state, one which helps consumers in the light of the coming fall and winter and will ensure that they do not have to pay peak electricity prices of the kind seen this spring and summer.
The legislative amendment, should is pass, will provide an alternative to floating packages based on the exchange price of electricity, while home consumers will be given the opportunity to buy electricity off-exchange.
Domestic consumers who have previously signed a fixed electricity contract can switch to universal service without a contractual penalty, and can also withdraw from the universal service at any time.
The price of the universal service is to automatically apply to all home consumers currently using it, which includes those who have not yet signed an electricity purchase agreement and consume electricity as quoted on the Nord Pool exchange.
The draft bill will not stipulate the universal service's price level, but establishes the principles of pricing.
The price should be revealed in mid-September, once the amendments to the law have been adopted and the Competition Authority has determined the price, after coordination rounds involving electricity sellers.
When determining the price, the Competition Authority must take into account the electricity production costs as well as reasonable profit levels for the electricity producer. The electricity seller may also add sales costs.
The reform will require state generator Eesti Energia to sell electricity to Estonian household consumers and all electricity distributors as a universal service from October this year, until April 30, 2026, if the bill passes.
The Riigikogu is due to return after its summer recess in Mid-September, meaning the electricity reform sittings have been convened on an extraordinary basis.
Editor: Andrew Whyte, Mirjam Mäekivi, Marko Tooming