Minister: Universal electricity price likely to be below €200 per MWh

Kristjan Järvan on Tuesday's 'Esimene stuudio'.
Kristjan Järvan on Tuesday's 'Esimene stuudio'. Source: ERR

The proposed universal electricity service, currently being processed at the Riigikogu, should see electricity prices below €200 per Megawatt-hour, or €0.20 per Kilowatt-hour, to domestic consumers from the autumn, pending Competition Authority approval and the relevant legislation passing at the Riigikogu, IT and Foreign Trade Minister Kristjan Järvan (Isamaa) says.

Appearing on ETV political head-to-head show "Esimene stuudio" Tuesday evening, the minister said:  "I hope, /.../, that we can offer less than €200 [per MWh], at least. I hope that that won't mean one or two euros below a couple of hundred, but ceratinly more than that.

"However, I don't want to pressure the Competition Authority, which will get to make a decision on what the right price should be," Järvan went on, adding his rationale for not establishing a price ceiling on electricity prices, as has been planned for natural gas to domestic consumers.

"Establishing a price ceiling in a technical sense would have been highly unreasonable, since then the consumer would, no matter what package they have, have no motivation to choose the best package, since the state would pay the difference," he added.

"In this sense, a universal service framework is many times better. We can see that the situation on the energy market will not be resolved in just a few months. We have a market failure in the sense that, although we have a price ceiling, new production capacities and increased supply will only reach the market after years. But in the meantime, the home consumer must also survive. The universal service gives options to consumers to get reasonable electricity prices, in these times."

A price ceiling was put in place last winter, when the phenomenon of record electricity prices was still quite a new one; initially administering support was passed on to local government, and customers were responsible for applying for aid themselves. The new system, should it enter into force, will see support applied automatically to bills.

An estimate by state electricity generator Eesti Energia of  the cost price of electricity it produces at €50 per MWh is somewhat outdated nowadays, Järvan added, putting the figure around €10-€20 higher.

That said, the extraordinary, current price of electricity has been caused by an extraordinary situation, he said.

"Let's be honest – up to now we had been getting our electricity at a very reasonable price for many years. In conditions of peacetime, that market worked. When Russia attacked us by using energy as a weapon, the shortcomings of the market were revealed - both in terms of transparency and in terms of the fact that the last bidder on the electricity market sets the price for everyone," Järvan went on, referring to the Nord Pool exchange, which nearly a month ago saw a price of €4,000 per MWh, over the period of one hour.

Notwithstanding his price estimate, Järvan said no agreement had yet been met at cabinet level on whether and how to support businesses' electricity costs, though his party, Isamaa, is of the opinion that it could be extended to business also.

He said:  "We can discuss what this price could be. Some of the boards [of companies] have foreseen the situation and fixed their electricity prices. Today, nearly 70 percent of the electricity that goes to companies is in fixed packages. Then, in a sense, the coalition partners have a better chance to argue against [Isamaa]. /.../ Isamaa's opinion is that the universal service framework is good and could have been extended to companies. /.../ I wouldn't venture to say it won't happen, but I think here is a place where the government should, could, and hopefully will, intervene, as soon as possible."

Järvan added that he was not optimistic about any EU agreement on capping the price of CO2 quota prices at a scheduled meeting today, Wednesday, despite a proposal from member state Poland that a price ceiling of €30 per MWh be set which, Järvan said, was a reasonable level.

The bill which will install the universal electricity service to households faces its second Riigikogu reading today, Wednesday, after which only minor amendments can be made ahead of a third and final reading.

Should it pass that reading the price level of €0.20 per KWh or €200 per MWh still needs approval from the Competition Authority (Konkurentsiamet).

 The record levels of CO2 quota prices (nearly €100 per tonne), which, for instance, Eesti Energia has to pay as a user of oil shale in electricity generation, could be frozen to as high as €30 per tonne, Poland's prime minister, Mateusz Morawiecki, proposed.


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Editor: Andrew Whyte, Marko Tooming

Source: "Esimene stuudio", interviewer: Andres Kuusk

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