Universal electricity price remains same at peak and off-peak times

Electricity pylon.
Electricity pylon. Source: Siim Lõvi /ERR

As a means of avoiding the feared over-consumption of electricity through the winter, the Estonian state says it initially does not plan to provide separate daytime and nighttime tariffs with its universal service, in order to disperse peak consumption.

The universal service came into effect in autumn as a means of mitigating soaring electricity prices to domestic consumers, by capping the price-per-MWh. Domestic consumers were generally automatically added to the service, and needed to opt out, if they wished to retain their earlier contract with their electricity supplier.

Prime Minister Kaja Kallas (Reform) has on more than one occasion appealed to the consciences of Estonians to consume less electricity this winter, particularly during peak times, to head off the risk of power outages.

Timo Tatar, deputy secretary general for energy at the Ministry of Economic Affairs and Communications says that failures at several power plants in the Nordic countries has resulted in lower electricity supply for the entire Baltic Sea region.

Tatar said: "Compared with potential peak consumption levels, the overlap of production capacities is exceptionally small."

"Consequently, this winter, it makes sense for consumers to consume their electricity responsibly, using it as little as possible. It is especially important to save during the morning and evening hours, when electricity consumption is traditionally at its highest, while the electricity reserve in the system at its smallest," Tatar went on.

The peak times are 7 a.m. to 9 a.m. and 4 p.m. to 7 pm. In the past, the logic with electricity sales, where the price level has been cheaper at night and early in the morning, and more expensive during the daytime and evening, including these peak times, has helped to disperse consumption somewhat. 

However, the new universal service retains the same price level, so it would appear that there is no incentive to spread out electricity consumption any more.

IT and Foreign Trade Minister Kristjan Järvan (Isamaa), sponsor of the universal service policy, says that there is nevertheless no need to introduce price differentials between peak and off-peak times as yet, and any such difference would be negligible in any case.

Järvan said: "The universal service price level logic is based on production price, with a small profit margin added on. Since we cannot force Eesti Energia to sell electricity at a loss, the profit share is the maximum price difference between the two tariffs. But since this profit margin is small, the maximum day and night price could differ by just one cent per KWh. We can't see that this will make consumers change their habits significantly."

Consumption is affected more by the network connection fee, which is much higher during the day than at night, Järvan added.

In addition, alterations to the universal service would cause confusion, while the whole system would become much more complicated with two tariffs, Järvan said.

Universal service did not result in party time

While statistics have not revealed how the universal service has affected daytime consumption alone, the overall change in pattern is known.

"Compared with last year, less electricity was consumed in Estonia in both October and November.

"This comes even in the situation where November this year was a little chillier than last year. In fact, it also appears that peak consumption is not higher this year, than last year. It seems, then, that despite the advent of universal service, the Estonian people have acted relatively sensibly when consuming electricity, and there has been no major party," Tatar added.

As a result, Tatar, too, does not see a two-speed tariff as necessary, though does not rule it out either.

He said: "Yes, there is definitely an option to artificially split the current price of the universal service into two, and create a slightly higher price for peak hours, but the current consumption statistics show that people are probably used to consuming electricity responsibly."

Companies consume three times more electricity

Minister Järvan says that, in order to reduce peak consumption, companies should be looked at instead, as they consume three times more electricity than domestic consumers.

The universal service was subsequently rolled out to businesses after the domestic consumers' service was in place, though uptake from small- to medium-sized enterprises has not been high, portal Delfi reports (link in Estonian).

"The Ministry of Economic Affairs and Communications is instead looking at measures to alter the consumption of business consumers, because it is easier to alter the consumption of the top 10 companies by electricity usage than that of 100,000 domestic consumers," Järvan went on.

"However, it is naturally also welcome if domestic consumers also take into account it being more reasonable to consume more electricity at night, and obtain some form of compensation from the fact that network fees are cheaper at night," Järvan added.

When it launched at the end of September, the universal service price of electricity was provisionally set at €154.08 per MWh, or 15.4 cents per KWh, though this figure is subject to amendment.


Follow ERR News on Facebook and Twitter and never miss an update!

Editor: Andrew Whyte, Mari Peegel

Source: ERR Radio News

Hea lugeja, näeme et kasutate vanemat brauseri versiooni või vähelevinud brauserit.

Parema ja terviklikuma kasutajakogemuse tagamiseks soovitame alla laadida uusim versioon mõnest meie toetatud brauserist: