Regulator: Causes of Nord Pool price spikes will take time to ascertain

Evelin Pärn-Lee.
Evelin Pärn-Lee. Source: Ministry of Justice

Sharp and unprecedented spikes in the price of electricity in recent months require a close monitoring of the market, the director of the Competition Authority (Konkurentsiamet) says.

This is particularly the case with vital services – which are defined as those services the population is accustomed to using and receiving in the day-to-day - while at the same time the authority is facing a heavy workload in establishing the facts of how such high prices came to pass not only in electricity, quoted at €4,000 per MWh at one point last month, but most other energy types and other essentials such as food.

The authority has announced that: "Entrepreneurs with significant market power must not forget that they have an obligation to not abuse their market power; among other things, they are not allowed to apply unfair prices or other unfair business conditions.

"It is also important that retailers do not behave unfairly towards food suppliers, because the functioning of food production is especially important in times of crisis, " the Competition Authority went on.

The authority's director, Evelin Pärn-Lee, said on Friday that getting to the bottom of the factors behind the price spikes will take time, and has required an extension to the deadline for undertaking such work.

She said: "The volume of data to be analyzed is vast, and we need more time to gather the necessary information and analyze it."

"We understand there is great public interest at stake here, and we are working hard to find answers to those questions that have arisen, and to propose solutions to them," she went on.

One particular anomaly, even in the context of the record-breaking prices of the past year, came on August 17 when, for one hour of the day – peak time, in fact, between 6 p.m. and 7 p.m. - electricity was quoted at €4,000 per MWh,* the maximum level permitted at the time under European Commission rules.

Several meetings have already been held involving representatives of the Nord Pool exchange, suppliers and generators of electricity and the regulators from all three Baltic States, Pärn-Lee said.

Claims at the time the €4,000-per-MWh spike was experienced, that this was the result of low production capacity, also exacerbated by a low volume of renewables energy generation arising from a relatively windless summer, were not the real cause, Pärn-Lee added.

She said: "It has already been established that there was no shortage of production capacity on August 17, but if Nord Pool's system had been more flexible, the price level would not have turned out like this."

At the same time, the Competition Authority's powers in intervening in such cases are limited, she went on. "The Competition Authority cannot directly intervene in many cases in the activities of businesses at the wholesale level.

The regulator also appealed to the damage unfettered high prices could do to business.

Pärn-Lee said: "While the state has ensured the existence of compensation mechanisms for domestic consumers, we must not forget that in the current situation it is vital to ensure the competitiveness of the Estonian economy as a whole, while the rapid increase in the price of energy carriers also hurts entrepreneurs."

The authority is also dealing with price level applications relating to most other types of energy, including natural gas and wood chippings, both used to heat water provided as a type of heating to many apartment blocks, for instance.

Vehicle fuels and food prices, also experiencing unprecedented price levels and rates of price increase, are also in the picture, she said.

The authority does, however, only approve price changes within the parameters of current legislation and if felt justifiable.

The Competition Authority is also under pressure to provide a concrete price cap for electricity to be provided to consumers for from the start of next month, following a bill to provide the universal service passing at the Riigikogu yesterday, Thursday.

*Exclusive of VAT.


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Editor: Andrew Whyte

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