Eesti Energia: Margins cannot be kept down forever

Electricity (illustrative).
Electricity (illustrative). Source: Siim Lõvi /ERR

Eesti Energia's recent decision to change the prices of its exchange-based electricity packages that will see some customers charged a bigger margin and monthly fee follows higher trading costs during the crisis and the fact that profit margins cannot be kept down forever.

Eesti Energia on Tuesday said that a decision to harmonize the prices of its exchange-based electricity packages will see the price drop for 91,000 customers, while 11,000 will see their costs rise, abruptly in some cases.

A customer received a letter from the national energy company telling them that their new margin will be 0.44 cents per kilowatt-hour and monthly fee €1.99, up from 0.1 cents per kWh and €0.39 per month.

Eesti Energia's press representative Mattias Kaiv said that the 340-percent hike should not be calculated in those terms as changes to near-zero margins should not be expressed as percentage.

Roul Tutt, head of home market sales for Eesti Energia, said that some customers' very low margins are from the pre-crisis period when energy prices were low, which situation was frozen during the crisis. "But margins cannot be kept down forever. Because the market price of electricity has stabilized, we will be harmonizing our exchange package rates. Eesti Energia will still offer the lowest margin of 0.44 cents per kWh even after the harmonization," Tutt said.

He added that some customers' margins will fall by up to 0.58 cents, while others will grow by up to 0.44 cents, and that the margin hike will add €1 to the average electricity bill, while the biggest reduction of 0.58 cents will save €1.5.

Competitors' margins now higher

Competitor Eesti Gaas charges a higher margin on its exchange-based price package of 64-66 cents per kWh.

"At the same time, we do not charge a monthly fee, which often has a greater effect on a small consumer's bill than the margin," said Kersti Tumm, head of communication and marketing for Eesti Gaas.

220 Energia OÜ charges 0.63 cents per kWh and Elektrum 0.65 cents.

Tarmo Kärsna, head of energy sales at Alexela, said that Alexela uses the term "price period" which is one year for exchange-based contracts and during which the customer's margin will not grow.

Alexela has three exchange-based packages one of which sports a zero margin. The seller also offers a package where the price of electricity is fixed for a period of one month and capped at the universal service price level after which the customer can decide whether to switch to the exchange or continue with their existing solution.


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Editor: Marcus Turovski

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