Estonian state expects to pay out €125 million in energy subsidies

Light bulbs.
Light bulbs. Source: Siim Lõvi /ERR

Having paid out €55 million in subsidies between October and December to help cover rising household energy bills, the Estonian state expects to pay a further €70 million between January and March. Although gas prices have now begun to fall, the total cost of energy subsidies during this year's heating season is forecast to amount to €125 million.

During the current heating season, which in Estonia lasts from October until the end of March, the Estonian state has been paying out subsidies to compensate household consumers for the rapidly rising energy costs.

Between October and December last year, the state paid around €55 million in energy subsidies, with the amount for the entire heating season expected to reach €125 million.

The final total will ultimately depend on any changes in energy prices over the next month, as well as consumption levels and adjustments to household energy contracts.

Between October and December, subsidies to compensate for rising electricity prices cost the Estonian state €30.6 million, including VAT. The Ministry of Economic Affairs and Communications estimates that a further €35.3 million may end up being spent between January and March to cover the increased cost of electricity for household consumers.

In order to soften the blow of rocketing electricity bills, household consumers in Estonia are being compensated for the cost of electricity over and above €80 per megawatt-hour, exclusive of VAT, up to a maximum compensation amount of €50 per MWh. According to the ministry, this equates to a 21 percent reduction in electricity bills for the average household consumer.

Household electricity consumers are also compensated for the average monthly price which exceeds 8 cents per kWh (exclusive of VAT), up to a maximum of 5 cents per kWh.

Those eligible to receive subsidies also include consumers of electricity as a universal service. As the universal service price is higher than 8 cents per kWh, universal service customers also automatically received compensation of up to 5 cents per kWh from their electricity provider.

However, since the new year, the exchange price of electricity has begun to fall, from an average of 26 cents/kWh in December to 10.4 cents/kWh last week (plus VAT and the operator's profit margin).

Gas prices fall below subsidy levels

For domestic gas consumers, the Estonian state is compensating 80 percent of the monthly average gas bill, which exceeds €80 per MWh,  or €0.7744 per cubic meter, exclusive of VAT.

Consumption per household is capped at 2.6 MWh or 251.7 cubic meters – the average monthly amount for a private house.

In the last three months of 2022, €13.2 million was paid out to compensate for the increase in gas prices. The state estimates that it will need to pay out an additional €18.2 million in gas bill subsidies during the opening three months of this year.

However, gas prices have also begun to drop in recent months. In February, Eesti Gaas lowered its price for household consumers to €0.84 per cubic meter, including VAT, which is below the compensation level. Natural gas futures are currently being traded on the Dutch exchange TTF at less than €50 per MWh.

From March, Eesti Gaas will lower the price for household customers to €0.73 per cubic meter including VAT.

Domestic consumers of district heating are also compensated for 80 percent of the cost of the electricity over and above €80 per megawatt-hour (exclusive of VAT).

Compensation paid out to cover district heating costs amounted to €10.9 million between October and December 2022, and is forecast to rise to €16.2 million including VAT between January and March.


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Editor: Michael Cole

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