According to Kristofer Vähi, head of portfolio management at Eesti Gaas, a significant portion of the market margin for electricity exchange packages consists of balancing costs, meaning that the addition of desynchronization costs to balancing costs would have a notable impact on margins.

"On the other hand, the portion of this margin in the overall electricity price and cost is small. It's difficult to assess the size of the impact today, as the government's exact solution has not yet been clarified," Vähi said.

Sander Randver, head of energy products at Enefit, noted that under the current outlook, balancing costs will not decrease; they will either remain the same or rise slightly. "If market margins for exchange packages increase, they are expected to rise by around 2-3 euros per megawatt-hour," he said.

For comparison, the average electricity market price in the Estonian price area last month was €84.15 per megawatt-hour. Forecasts suggest it will remain around €100 per megawatt-hour during the winter.

Randver pointed out that if balancing costs increase, it makes no difference whether a consumer is on an exchange package or plans to sign up for a fixed-rate electricity package, as this price affects both.

"However, this doesn't affect those who already have a fixed-rate electricity package," Randver said, adding that in the case of exchange packages, electricity sellers can change the price with 30 days' notice.

Kalvi Nõu, portfolio manager for energy trading at Alexela, acknowledged that balancing electricity prices are on the rise in the Baltic states and are expected to increase further with desynchronization, though the market is in a wait-and-see mode.

"Margins need to be raised to recoup costs – in my opinion, the market is still somewhat in a wait-and-see phase, with close attention being paid to developments in the balancing market over the coming months," Nõu said. He added that there is no active movement in the market yet indicating that anyone is eager to raise prices.

How to cover frequency reserve still undecided

Another issue is covering the costs of frequency reserves. Initially, Elering wanted to introduce a balancing fee for both electricity producers and consumers to fund the purchase of frequency reserves. However, last week, the Ministry of Climate instructed Elering to change this method, as Estonian producers and consumers would otherwise be treated unequally compared to those in Latvia and Lithuania.

As a result, the addition of the frequency reserve fee to bills has been postponed for at least six months and will be covered by congestion charges for the time being.

"It's very important to see what happens next with the frequency reserve measure. Will it continue to be compensated through congestion charges, or will consumers and producers start paying for it?" said Kalvi Nõu.

According to Nõu, from a market perspective, it is crucial to know as early as possible which method will be chosen to properly price customer contracts. "It's difficult to do this. We don't know what will happen in six months or whether it will be decided in one, two or four months," he said.

"From our point of view, a good solution would be if Elering continues compensating consumers through congestion charges. We also consider this to be a fair solution," Nõu added.

Enefit estimates that applying the frequency reserve fee to consumers and producers would result in a cost of €5.31 per megawatt-hour, but Sander Randver noted that there is still no complete clarity on this issue.

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