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Experts: When concluding new electricity contract, always remember that prices fluctuate

Electricity cables in the snow.
Electricity cables in the snow. Source: ERR

When entering into a new electricity contract deal, be it a fixed-price contract or a variable rate, customers should always bear in mind that the price of electricity on the Nordpool exchange will always fluctuate, particularly in the summer months.

Tarmo Kärsna, chief of sales at Alexela, told ERR that spring and autumn are the most active periods for concluding electricity package contracts, meaning these periods also see more packages expiring, than at other times.

This does not mean customers will be left without electricity, just that the fixed price package ends and they can be transferred to a variable price package.

Over 50,000 households are due to see their contracts expire in the next three months, it is estimated.

Kärsna said: "If you consider spring of last year, when the price of the universal service had risen, prompting customers to leave."

The universal service had been put in place at a time of soaring energy prices, starting in the latter part of 2021, but when electricity prices on the exchange started to drop, this fixed price was in fact higher than that which could be had on a variable rate package.

ERR finds fixed-price customers in Finland pay €60 less per year than in Estonia

ERR conducted a price comparison on Thursday, which revealed that Finnish energy companies offer fixed-price electricity packages at more favorable rates than do Estonian suppliers.

The average household consumer here spends over €60 more on electricity per year than do customers in Finland, where median, mean or mode wages are considerably higher.

The state-owned Eesti Energia offers fixed-price, six months deals at 11.6 cents per Kwh, inclusive of the monthly connection fee.

If consuming 2,400 Kwh in a year, electricity should cost the consumer €25.22 per month, or €302.64 per year, ERR finds.

According to Finnish price comparison portal, supplier Vihreä Älyenergia Oy currently offers the cheapest electricity contract in that country, with a six-month contract costing 9.97 cents per Kwh (7.98 cents per Kwh for the electricity plus a monthly fee of €3.98).

At an annual consumption of 2,000 Kwh, the consumer in Finland would be billed €239.28 per year, or €19.94 per month.

Over the six months, the Estonian customer therefore pays €63.36 more than the Finnish one.

Even on a variable price package, Estonia works out more expensive than its northern neighbor, when it comes to electricity: The average price on the Nordpool exchange across January stood at €126.48 per Mwh in Estonia, compared with €106.22 per Mwh in Finland.

Tarmo Kärsna at Alexela in any case recommends a fixed-price electricity package for an average Estonian family, if their current package is due to expire soon, as a hedge against fluctuating prices.

On the other hand, taking a 12-month fixed-price package right now was not wise, Kärsna went on, as exchange prices in summer are likely to be low – yet on a fixed package you would not be able to capitalize on this.

Electricity trader recommends variable rate electricity package

Marko Allikson, board member at Baltic Energy Partners, an independent energy trading company, on the other hand recommended a variable rate package when it comes to electricity.

"Electricity in and of itself is not a particularly interesting product, which it is somehow worth basing your life around," he said.

"An exchange (ie. variable] package is simple in the sense that you know you will always be getting the market price. Sometimes it is higher sometimes it's lower, but you don't have to deal with matters of electricity on a daily basis," Allikson added.

Allikson noted that it is very hard even for experts to beat the market, in this case via a fixed contract, using the "house always wins" analogy from the world of gambling.

Over the long term, a variable rate brings greater peace of mind, once one is prepared to accept that prices go both up and down, he summarized.


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Editor: Andrew Whyte

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