Monopoly companies in Estonia to start paying supervisory fees

TALLINN – A legislative amendment has exited the Estonian Ministry of Justice according to which companies in a monopoly status will have to pay a supervisory fee ranging from 0.02 to 0.2 percent of the revenue of the regulated company.

"The Competition Authority protects consumers' interests by ensuring that companies in monopoly status cannot charge too high prices for vital services such as electricity, water, natural gas and district heating to customers," Justice Minister Maris Lauri said in a press release on Monday.

"The Competition Authority also exercises supervision over railways, mail, airlines and ports. It is therefore very important that the independence of the Competition Authority is guaranteed," Lauri added.

In recent years, a number of tasks at the European Union level have been added to the Competition Authority and more are about to be added in the near future.

"For instance, the Competition Authority sees to the functioning of the EU-wide electricity and gas market. In addition, together with its foreign peers, it coordinates several EU-wide infrastructure projects, such as the synchronization of the electricity system and the Estonia-Finland gas link," the minister noted.

"Compared to the other Baltic countries, the Estonian Competition Authority is underfunded and has fewer staff, which does not allow it to carry out its tasks as efficiently and thus protect consumers' interests," she said.

The draft legislation is intended to change the model of financing of the Competition Authority so that part of its budget would come from supervisory fees charged to monopolies with regulated prices. Such fee would be paid by electricity and gas network companies and, in the district heating sector, by network operators and heat producers.

The levying of the fee would take place on a similar basis in the water sector. A supervision fee would also be paid by the universal postal service provider, railway infrastructure companies and the businesses running airports and ports.

The supervision fee will be included in the price of the services provided to final customers. The rates are set by law and cannot be negotiated. The Competition Authority calculated the estimated impact of the increase in the cost of services for a household of three people living in a three-room apartment and using water, electricity and district heating.

Depending on the services, the expenses of the household will increase by 14.2 to 33.3 cents per month, which makes up from 0.17 to 0.26 percent of the household's current expenses. If a one-person household lives in a three-room apartment, the costs will increase by 11.7 to 25 cents per month.

According to the ministry, the changes will also ensure that the objective of climate neutrality is achieved in a less burdensome way for the consumer.

"A similar funding model is used in Estonia to finance the Financial Supervision Authority. It is also used by economic regulators in most European countries," Lauri said.

The proposed model would add an additional 700,000 euros to the budget of the Estonian Competition Authority, while saving 900,000 euros in national budget expenses.

As the supervisory fee would be paid by the undertakings that need approval of their pricing, the extra money would only be used to finance the supervision of regulated markets. Normal competition oversight will continue to be financed from the state budget.