In 2024, Estonia imported electricity from foreign countries at a price of €92 per megawatt-hour. Meanwhile, Finland exported electricity at just €11 per megawatt-hour — nearly eight times cheaper.

The reason for this price difference is that when electricity prices vary between Finland and Estonia, the transmission system operators, Elering and Fingrid, retain the price difference as a congestion fee.

These operators collect similar fees across the European Union to fund the construction of new cross-border connections, such as the planned EstLink 3 electricity cable between Estonia and Finland. The revenue generated from these connections is referred to as a congestion fee, and in the year before last, Elering collected €128 million this way.

Eesti Energia CEO Andrus Durejko said the current system is not the most beneficial for society.

"If we sum it all up, it's clear that Estonia, and perhaps the broader Baltic region, has effectively subsidized Finland's electricity prices by approximately half a billion euros over the past five years. That is a significant amount of money. We need to consider what kind of regulatory framework and support system would be most beneficial for society in the future. The current system is not, unless we find a way to use these funds more effectively for developing our economy," he said at the Delfi Energy Conference.

Durejko pointed out that in Finland, congestion fees are immediately reinvested into the economy. Specifically, they are used to lower network service fees for consumers, making electricity even cheaper for households and businesses.

At present, Elering's transmission service accounts for about a quarter of Elektrilevi's network fee — approximately 1.15 cents per kilowatt-hour. Last year, Estonia's average electricity end price was 17.4 cents per kilowatt-hour. Based on this calculation, Elering's share makes up around 6 percent of the final electricity price.

Ministry: Regulation does not allow lowering network fees like in Finland

Rein Vaks from the Ministry of Climate said that, unlike in Finland, it is not legally possible in Estonia to reduce consumer electricity bills using congestion fees. European Union regulations stipulate that congestion fees must primarily be used to fund cross-border connections, he said.

Elering could only use these funds for other purposes if it can forecast that a sufficient amount has already been collected for such connections.

"Finland has indeed used the funds to reduce network fees. As far as we know, this has been done because their projections indicate that they will have enough money to finance the new connections in a timely manner. According to their estimates, they will have surplus funds," Vaks explained.

Elering board member Erkki Sapp added that the TSO currently plans to build both the new Estonia-Finland electricity cable, EstLink 3, and a new Estonia-Latvia connection via Saaremaa. The estimated cost of these projects for Elering is approximately €1.4 billion and collecting congestion fees to fund them is considered entirely reasonable.

"Congestion fees are intended specifically for increasing transmission capacity. Therefore, it makes sense to use them for this purpose rather than seeking alternative sources of funding," Sapp said.

Sapp explained that when there are sufficient connections between two countries, electricity prices in those markets align. However, if at any given time one country has more cost-effective electricity production than can be exported due to transmission limitations, congestion occurs, leading to price differences between the two markets.

For each hour that such a price difference exists between two countries, electricity exchanges pay transmission system operators a congestion fee, often referred to as a bottleneck fee. The purpose of this fee is to finance new electricity connections. The better a country's electricity networks are integrated, the smaller the price difference between markets.

Sapp added that congestion fees are also used to finance risk-hedging instruments, enabling electricity sellers to offer fixed-price packages to consumers.

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