Estonian PM: Reform of electricity as universal service entails risks

TALLINN – Commenting on a proposal by Minister of Entrepreneurship and Information Technology Kristjan Jarvan for a reform of the offering of electricity as a universal service, Estonian Prime Minister Kaja Kallas said that the long-term consequences of such potential decisions must be taken into account, as the reform would distort the market and may negatively affect the decisions of electricity sellers planning to enter our market.

Under the guidance of the minister from the Isamaa party, a bill to reform the universal service has been drafted at the Ministry of Economic Affairs and Communications. The amendment would oblige Eesti Energia to sell electricity to consumers at the most favorable price --  at the exchange price if the exchange price is below the price of electricity as a universal service, and at the universal service price set by the Competition Authority if that price is lower.

Speaking at a government press briefing on Thursday, Kallas remained skeptical about the proposed changes. In her view, people should take the price risk when choosing an electricity package.

According to Kallas, what is sought by the amendment is reminiscent of a situation where, for example, you have bought airline tickets a long time in advance in order to get them at a good price, and when the price becomes even cheaper before the flight, the more expensive price you paid will no longer count.

The prime minister described the universal service as purely a crisis measure, which has justified itself as such, as during the first three months that it was available, the universal service was cheaper than the exchange price for consumers. However, in January the exchange price was below the price of the universal service.

"For the first 24 days of January, the exchange price was 102 euros, while the universal service was more expensive -- 154 euros," Kallas said, and expressed doubt as to whether the law should be changed just because of the unfavorable price difference in January.

She stressed that the long-term impact of the change on the business environment also has be taken into account.

"After all, we are keen for new electricity producers to invest in our market. We are not a regulated market," Kallas said. She added that Jarvan's proposals will be discussed in the coalition before the March elections.

The premier stressed that electricity market regulation should rather seek to direct people to consume less and better time their consumption. 

"The universal service doesn't make people consume outside peak hours, which has been a problem. But if people's behavior can be guided in some way, we are ready to discuss these options," Kallas told the news briefing.