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Universal service electricity price scheme to be scrapped in May

Electricity pylons in Estonia.
Electricity pylons in Estonia. Source: Ken Mürk/ERR

A universal service scheme which guaranteed electricity prices is to be scrapped two years ahead of schedule, after its raison d'etre, ie. keeping down household bills, disappeared once the electricity exchange price fell below this universal price.

The government has approved, and will send to the Riigikogu, the bill amending the Electricity Market Act and the other relevant legislation which provides for the termination of the universal service, from May of next year.

The bill will also create a legal regulation for the introduction of an electricity reserve capacity mechanism. 

The purpose of universal service was to protect consumers from high electricity prices at a time of record levels starting from late summer 2021, but since then, electricity prices quoted on the Nordpool exchange have been lower than this universal service price – there has not been a single month in 2023, even in winter, when the Nordpool price outstripped the universal service price, in fact.

The universal service will thus be terminated two years earlier than originally planned. 

Administrative costs relating to a Liquefied Natural Gas (LNG) berth and infrastructure in Pakrineeme, near Paldiski, are also included in the legislative amendments, as is the creation fo a national energy reserve in line with EU regulations.

The entire universal service regulation will be declared invalid as of May 1, 2024. 

Customers wishing to hedge against price fluctuations and consume electricity at a fixed price can continue to do so by concluding a contract of their choice with their supplier. Fixed packages have been cheaper than the universal price in any case.

The peak usage of the universal service cam in January this year, when over 310,000 household consumers were on that plan.

As of October, the number of home consumers on the universal service stood at 72,000.

In order to create the national energy reserve, meanwhile, a state aid permit must first be obtained from the European Commission. 

Grid distributor Elering can then start preparing a lower offer, whose conditions of will be subject to review by the Competition Authority. 

The winner of this tender will be obliged to be able to provide a certain amount of production capacity at a certain period of time, as set by the grid distributor.

The LNG strategic reserve will be at 1TWh in volume.

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Editor: Andrew Whyte

Source: Ministry of Climate

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