Minister: No plans for state aid to cover business electricity costs

Kristjan Järvan (Isamaa).
Kristjan Järvan (Isamaa). Source: Ken Mürk/ERR

Estonian Minister of Entrepreneurship and Information Technology Kristjan Järvan (Isamaa) has informed companies, which applied for compensation to cover costs resulting from the rise in electricity prices, that there are no plans for the state to provide additional financial support.

In a letter to the Estonian Chamber of Commerce and Industry (Eesti Kaubandus-Tööstuskoda) and the Estonian Employers' Confederation (Eesti Tööandjate Keskliit), Järvan wrote, that there is no prospect of Europe returning to the use of cheaper energy sources from Russia.

"In the longer term, rapid adjustment of the economy to the new situation will contribute more to the country's economic development and the competitiveness of its companies than subsidies. The signal given by the market price is the best incentive for (companies to) save energy and manage electricity consumption, (both of) which are necessary for the energy system to function at an optimal level."

Järvan argued, that in most industries, electricity consumption makes up a small proportion of total business costs and that no overwhelming threat to the solvency of businesses has occurred as a result of changes to the market price.

"Based on data from Statistics Estonia, it can be said that for around 90 percent of companies (in Estonia), electricity accounted for less than three percent of total business expenditure. For around 70 percent of companies, less than one percent of total expenditure went on electricity," Järvan wrote.

The minister did, however, acknowledge, that some sectors are more energy-intensive than others, and that there can also be a great deal of variation in energy use between companies in the same sector.

"There are certainly companies for which high electricity prices are a major concern, but this is not a universal problem that ought to be addressed with large-scale subsidies."

According to Järvan, claims that the state has enough funds available to cover businesses' electricity costs are wide of the mark, as the current  budget was drawn up in the context of a large deficit and rising tax revenues.

The minister also said, that if the universal service were to be extended and companies exempted from paying network charges and renewable energy fees, it may create the need for more capital to injected into Eesti Energia.

"It should also be noted, that the current universal service (price) is based on Enefit Power's generation capacity. Enefit Power would not be able to produce electricity on a large enough scale to extend the universal service to all consumers. The electricity shortfall would then have to be bought on the market at the exchange price and this would cause a huge financial burden for Enefit Power."

Järvan summed up his reply to the business organizations by stating that, at this stage, that there are no plans to introduce further support mechanisms to help businesses cope with rising electricity prices.

Business proposals

The Estonian Chamber of Commerce and Industry (Eesti Kaubandus-Tööstuskoda) and the Estonian Employers' Confederation (Eesti Tööandjate Keskliit, along with 19 of the country's business organizations, approached the government with a proposal to introduce temporary support measures, which would compensate Estonian businesses for the increase in electricity prices.

Arto Aas. Source: Jarek Jõepera

"While other countries are looking for ways to support their businesses, Estonian business consumers will face a 13 percent increase in network tariffs and a 10 percent rise in renewable energy fees, in addition to no (state) aid, from January 1. The government's rhetoric, that businesses have to cope with the crisis resulting from the market's failure by themselves, while households, municipalities and foundations, for example, are being supported, is also hypocritical," said the appeal to the government, which was written by Mait Palts and Arto Aas.

The letter also contained four concrete proposals to ease pressure on business resulting from the rising electricity prices:

(1) To temporarily exempt companies from paying electricity network charges;

(2) To exempt companies from paying the renewable energy fee;

(3) To compensate companies for electricity costs, which exceed the price cap;

(4) To extend the universal service to all businesses.


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Editor: Michael Cole

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