According to plans drawn up by the Estonian Ministry of Climate, the universal electricity service is set to be phased out from May 1 next year, two years earlier than had originally been planned.
Estonia's universal electricity service was set up last year against a backdrop of high electricity prices on the stock exchange. The thinking behind its introduction was the belief that consumers ought to be able to buy electricity at more affordable prices than those offered via the electricity exchange. The obligation to provide electricity as a universal service was placed on Eesti Energia. The electricity price offered was to be based on a production price, in agreement with the Competition Authority. However, up to now, no such agreement has been reached, and so a provisional production price of 15.4 cents per kilowatt-hour (kWh) still applies.
The universal service may have benefited consumers, but only for a few months, said Tanel Toomik, head of sales at Eesti Gaas. "Afterwards, it was at odds with market prices. I think all customers would have survived those months without the service," Toomik said.
The price of electricity as a universal service has not been able to compete with the average monthly exchange price in at any point this year. Therefore, the Ministry of Climate has now come up with a plan to end the universal service.
"In October, for example, domestic consumers on the universal service paid over €0.5 million more than if they had been on the exchange price. That affects around 75,000 consumers in total, who are currently on universal service," said Karin Maria Lehtmets, head of energy markets at the Ministry of Climate.
Consumers themselves have also noticed that the universal service is no longer the best option.
"Compared to July, about 30 percent of consumers have moved away from the universal service," Lehtmets said.
If the government approves the plans put forward by the climate ministry, the universal service will be brought to an end on May 1 next year. Prior to the change coming into force, electricity retailers will inform their customers that they are required to choose a new electricity package. Those who do not confirm their choice themselves will automatically be given their electricity at the exchange price. This can be changed at later date.
80 percent of Eesti Gaas' electricity customers are currently on an exchange package. Around one in ten subscribe to the universal service, Toomik said.
"I think that those who use the universal service don't notice their electricity bills at all. In other words, they are very small household consumers," he added.
At Eesti Energia, most customers have fixed electricity prices, with few universal service subscribers, said Santa Tohver, head of the Estonian market at Eesti Energia.
"We see that the migration from the universal service is continuing, but the uptake of new packages has slowed down. However, we have consistently informed customers that, at the moment, being on the universal service is the most expensive option and it is worth opting for a cheaper package. But, some customers may still be unaware of which electricity deal they have."
Tohver advises everyone to review their current electricity packages, adding that this winter's prices will not reach the levels of last year.
Anyone wishing to opt out of the universal service is advised to contact their electricity supplier.
Editor: Michael Cole