Eesti Energia: No more need for the universal electricity price scheme

Auvere Power Plant.
Auvere Power Plant. Source: Ken Mürk/ERR

State-owned electricity generator Eesti Energia has called into question the need for a universal service price of electricity, introduced by the government last autumn amid soaring energy prices.

Eesti Energia says that since the average price of electricity as quoted on the Nord Pool exchange has been lower than the universal price for two months already, this calls into question the raison d'etre of the scheme.

When introduced, the universal service was set to run to 2024, and not just through the current heating season, which has a little over a month to go.

Eesti Energia rejected an assessment by IT and Foreign Trade Minister Kristjan Järvan, who masterminded the scheme, that a cheaper universal price from Eesti Energia, not the sole supplier of electricity in Estonia but certainly the market leader, should be viable.

Eesti Energia stated that: "The obligations laid down in the law and placed on Enefit Power cannot be changed by changing the expectations of the owner of Eesti Energia. Should the legislature want to change the regulation of universal service, then the law must be amended accordingly."

Several electricity sellers are already offering fixed-price contracts which are cheaper than the universal service, Eesti Energia says, meaning the universal service has served its purpose.

However, Minister Järvan argues, Eesti Energia subsidiary Enefit Power (Eesti Energia trades under the name Enefit internationally-ed.) has taken advantage of the situation, and has created an unequal situation in the market.

Kristjan Järvan Source: Ken Mürk/ERR

In a written communique to the Ministry of Finance, Järvan wrote: "As you know, Enefit Power frequently does not sell its own electricity to retailers as a universal service, but mediates on exchange electricity, compensating the higher price of more expensive hours with the price difference of the cheaper hours."

"Since it is only possible for Enefit Power to actually sell electricity at the universal service price, other electricity sellers cannot purchase electricity from other generators, at that universal service price. This means, in our opinion, Enefit Power earns unjustified income by monopolizing the market situation," he went on.

Eesti Energia rejects this claim.

The company says Enefit Power is obliged by law to ensure the availability of electricity necessary for the provision of universal service, and for this purpose the company can either supply physical electricity or enter into price difference compensation agreements with sellers.

The company issued a statement to ERR saying: "According to the wishes of the Ministry of Economic Affairs and Communications and of the electricity sellers, once the universal service regulation was adopted, Enefit Power concluded so-called price difference contracts with the sellers."

"These providers therefore purchase all the electricity they need in order to provide universal service from the electricity exchange themselves, and all settlements take place on the basis of price difference contracts," the statement went on.

In January, Minister Järvan proposed bringing legislation to the Riigikogu which would reform the universal electricity service, while linking that to a vote of confidence in the government. However, he failed to get this approved at cabinet level.

Järvan then appealed to the Minister of Finance, asking her to change the owner's (ie. the state's) expectations of Eesti Energia to one whereby if the price of electricity on the stock exchange was cheaper than the universal service, the company should sell electricity to consumers at that stock exchange price.

The current price of the universal service stands at €154.08 per MWh, compared with last week's average price on the Nord Pool of €110.99 per MWh.

The universal service was first rolled out to domestic consumers, and subsequently to business customers.

The production price of electricity provided via the universal service is determined by the Competition Authority (Konkurentsiamet).


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Editor: Andrew Whyte, Kadri Põlendik, Barbara Oja

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