The Baltic power plant provides the eastern border city of Narva with both electricity and heat, mostly gas, and the system (cogeneration) allows the region to have the cheapest energy in Estonia, Monday's "Aktuaalne kaamera" reported.

Energy group Enefit has also supplied Narva with district heating below the cost price for several years as gas and pollution quotas were fixed under the old tariff.

But this is about to change.

"Last year, we incurred losses of almost €15 million from heat production in Narva. Across the whole year. And the losses have continued this year. Over the past year and a half, all the heat producers have repeatedly increased their prices. Unfortunately, we did not succeed. Our aim is to cover our production costs," said Andres Vainola, head of Enefit Power.

The Competition Authority has now allowed the company to raise its prices. The decision took 18 months to make.

"The price must comply with the law. If it complies with the law that these costs are justified, then unfortunately this price increase is [justified]. However, if more cogeneration is introduced, the more the marginal price will have to be reviewed immediately," said Külli Haab, head of the regulatory service of the Competition Authority.

Narva City Government wants the higher prices to be introduced in stages and is asking the state for help.

"It will be very tough. It would be sensible to at least postpone the price increase for a few years. This could be done at the expense of the CO2 tax. I appeal to the government, indeed for a city like ours such a steep increase is not reasonable," said Mayor Katri Raik.

Enefit Power said Narva's district heating will still be one of the lowest in Estonia even after the price hikes.

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