Food industry calls for state energy costs support as inflationary curb

Sirje Potisepp and Hando Sutter on 'UV Faktor', Tuesday, September 7 2022.
Sirje Potisepp and Hando Sutter on 'UV Faktor', Tuesday, September 7 2022. Source: ERR

While the food industry requires fast solutions on energy input prices, if soaring inflation is to be brought under control, at least according to the head of a sector lobby group, the government is only to make specific decisions on potential support to business later this month.

Support measures for private consumers of electricity, natural gas and district heating have already been itemized and are being processed at the Riigikogu, ahead of the start of heating season, which traditionally runs October to March inclusive.

Appearing on Tuesday's edition of ETV panel show "UV Faktor", hosted by ETV's Urmas Vaino, the head of the Estonian Food Industry Association (Toiduliit), Sirje Potisepp, said that while the food industry has managed well so far, but recent cost increases have been at an "insane" level. 

She said: "We haven't been able to translate that into the final sales prices yet. If we don't see the energy price moderate, then negative scenarios cannot be excluded,"

"Our sector is the one most connected to people's pockets, and we can see that they are looking for discount prices, which is a risk point for us," she went on.

Also appearing on Tuesday's "UV Faktor", energy markets expert Urmas Voit said: "If we analyze how the [energy] market appears, in 2021 the price difference between the Estonian and Scandinavian markets stood at €20, while this year the difference was already €50."

"Estonian prices are now more expensive than the Scandinavian wholesale price, so where are the risks of having to price things two or three times more costly?" he went on.

Eesti Energia board chair Hando Sutter said that: "Estonia has a small economy, one which is very open. A rapid increase in input prices would hit us quickly."

Minister of Economic Affairs and Communications Riina Sikkut (SDE), who also took part, says she sees a solution in pan-European measures. 

The minister said: "A few days ago, [Russian leader Vladimir] Putin said that the natural gas supply [via the Nordstream] will come back when the sanctions end, this is a special situation, we must have uniform solutions across Europe."

"A lot has been said about supporting household consumers, and the solution here is compensations. The picture is more varied in the case of entrepreneurs," the minister continued.

She also praised July's EU-level decision to reduce natural gas consumption by 15 percent, across the union. "It is extraordinary how quickly this decision was made. The most important role of the state is to ensure security of supply. In order for the market to function, gas prices must be decoupled from the price of electricity. The effect is to lower the average electricity price, but Estonia cannot do this alone," she said.

Estonian industry would no longer be competitive in a situation where neighboring states subsidize business when Estonia does not, Potisepp went on, citing a figure in Sweden of six billion in support, or Lithuania with one billion, though expressed satisfaction that the issue was on the table at least.

Urmas Voit opined that confidence in the Nord Pool electricity exchange had evaporated given the recent, unprecedented price levels and the huge fluctuations in hourly price, noting that demand was, or should be, a factor in price and not just supply, while transparency on both on the Nord Pool was required.

"The Competition Authority has stated that when they find out the reason for the price cuts, they will tell the public," Hando Sutter responded, adding that tampering with the price ceiling in the Baltic region is not the result of Kremlin activity – the record €4,000 per MWh experienced in one hour on one day in August, itself the maximum ceiling permitted at the time and which automatically triggered a raise in the subsequent price ceiling level, was the result of technical issues in power stations simultaneously being off-line.

Sutter recommended not leaving the Nord Pool in any case, as at a time of low capacity, it would lead to a potential shortage in sinter.

Minister Sikkut reiterated a call for greater transparency in the Nord Pool market and the lowering of the price ceiling, and added that the state would be ready to provide support to business later this month, pending cabinet discussions – though companies would not be spoon-fed, she said.

Sutter noted that two-thirds of customers have fixed prices in any case, while 50 percent of suppliers had similarly provided fixed prices.

The cheapest energy is from renewables, more specifically wind-power, he added.

Ultimately, Potisepp said, the issue was being muddied by different calculations and methods of calculation, especially for the average person, who is most interested in food costs on the day, adding that providing support to consumers only was not enough – a ceiling on natural gas and electricity prices was needed, to really control food price rises.

Appearing on "UV Faktor", Tuesday, September 6, were Minister of Economic Affairs and Communications Riina Sikkut (SDE), Eesti Energia Board Chair Hando Sutter, Director of the Estonian Food Association Sirje Potisepp and energy markets expert Urmas Voit.


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Editor: Andrew Whyte, Mari Peegel

Source: 'UV Faktor'

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