Enefit does not waive the universal service production price of 18 cents | New

The Competition Authority announced on Friday that the provisional price of electricity for universal service will be €154.08 per megawatt hour, or 15.4 cents per KWh. However, Vainola stressed that this price is tentative and that Enefit will continue to push for its preferred price of 18.18 cents per kWh.

Külli Haab, head of the regulatory division of the Competition Authority, said there were differences of opinion with Enefit Power, the former not considering the profit margins expected by the latter as justified.

“The Competition Authority brought in a financial expert to determine what would be a reasonable profit margin,” Haab said. “Our estimates are that sales profits are expected to be 25% lower than Enefit Power’s expectations,” she added.

Vainola said that as the law leaves room for the price to continue to be assessed, that is what will now happen, with the head of Elering expecting a new solution to be found d here November.

Regardless of what happens next, any new price will still need to be approved by the Competition Authority. “We will continue to charge 18 cents (per KWh). This is the producer price, which covers (our) costs,” Vainola said.

The universal service price includes operating costs and investments, as well as CO2. It also incorporates a reasonable level of commercial profit for electricity suppliers.

The largest proportion of the overall price, around 55%, goes to CO2.

Haab noted that while the price of CO2 recently rose from €90 to €60, it remains volatile, and if it were to change again, it would also impact the price of universal service generation.

According to Vainola, the price of CO2, along with environmental loads, are the main factors driving up Enefit’s production costs.

In the first eight months of 2022, Enefit Power paid nearly €440 million in state taxes, including a €350 million CO2 tax.

“Variable costs represent 75% of a producer’s cost price, of which CO2 represents the largest share. Our operating costs represent just over 5% of the cost price,” Vainola said.

The high share of CO2 costs in the price of electricity was also highlighted by the Minister for Business and Information Technology, Kristjan Järvan (Isamaa), who said that Estonia had not found enough allies to change the system so as to reduce the price of CO2 in Europe.

For this heating season, the government also anticipates the need to apply energy support measures which will add an additional five centimes per KWh to the price of electricity. Concretely, this means that this winter, the price of universal service for consumers should be between 13 and 14 centimes per kWh.

The service will be provided by 13 electricity distributors

Residential consumers are not required to make a great deal of effort to connect to universal service. While offers from electricity suppliers are expected to start appearing on November 7 and 8, according to Rein Vaks, head of energy markets at the Ministry of Economic Affairs and Communications, electricity suppliers have promised to retrospectively calculate the consumer bills to reflect connection from October 1.

Electricity as a universal service providers are required to offer the service to residential consumers in cases where their existing electricity package is more expensive than the universal service price.

To date, the following electricity suppliers have notified the ministry of their wish to supply electricity as a universal service: Eesti Energia AS, AS Eesti Gaas, AS Alexela, Elektrum Eesti OÜ, TS Energia OÜ, Saku Maja OÜ, AS Elveso, Ramsi Turvas AS, Terminal Electrique OÜ, Sagro Elekter OÜ, Alexela Energia Teenused AS, 220 Energia OÜ, Scener OÜ and Veerenni Jaotusvõrk OÜ.

Consumers who opt-in to universal service before September 30, 2023 will not incur financial penalties from suppliers for terminating existing electricity packages.

Universal service will be valid for four years, but consumers can opt out earlier if they wish.

Universal service is available on a voluntary basis to all private consumers and housing associations.

Minister for Business and Information Technology Kristjan Järvan said efforts are being made to ensure that micro and small businesses can also join the universal service from November.

More details about universal service can be found (in Estonian) here.

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