Eesti Energia gets lower than hoped for price hike

  • 2008-03-26
  • Staff and wire reports

HARD BARGAIN: Estonia's competition chief Kasepalu opted to defend consumers rather than boost the national utility's top line.

TALLINN - The Competition Board and Eesti Energia (Estonian Energy), the state-owned energy group, announced that they have agreed in principle on a tariff increase and that the new price of electricity will be nearly three times smaller than what the utility originally sought.
Margus Kasepalu, chief of the Competition Board, told the Baltic News Service on March 20 that if initially Estonian Energy had petitioned the weighted average price to be raised from the present 0.0418 kroon per kilowatt-hour to 0.0524 kroon, then the two sides agreed to a smaller increase to 0.0456 kroon per kilowatt-hour.

Essentially that actual size of the hike will be 2.8 times smaller than sought by Estonian Energy in its application.
The increase, which has not been finalized, took six months to negotiate, Kasepalu said.
He said the result was good for Estonian consumers, since it results in a savings of nearly a half billion kroons (32 million euros) for consumers.
The Competition Board intends to formally approve the new price in the coming days, Kasepalu said.
According to Estonian Energy executives, the two sides stuck to their different positions to the very end, particularly as regards to the price of oil shale and the output price of electricity at Narva Elektrijaamad, a generating subsidiary, which have the biggest effect on the price of electricity.
Estonian Energy CFO Margus Kaasik warned that the lower-than-expected price hike would have detrimental affects on the company's performance.

"Considering that the Competition Board did not endorse the price of oil shale at the desired level and made very substantial cuts in the labor, repair and maintenance costs of Narva Elektrijaamad, it will be significantly more difficult for Estonian Energy to ensure competitive wages for its employees and take care of existing production equipment," he said.
"Definitely the profitability of the company's economic activity for the owner will be lower than in previous years," Kaasik said.

After the power grid companies calculate their new transmission fees, Estonian Energy will endorse a new set of price packages for customers and publish them by March 31, the company said.
The new transmission fees and the new price list for electricity will step into effect from July 1 this year.
Estonian Energy said it hoped that adjustments in the price of electricity in upcoming years would be made annually in order to avoid a repetition of the present situation where the company is forced to ask for a steep tariff increase.

The company announced that domestic 2007 sales increased 6.7 percent to 7,273 GWh due to economic growth.

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Estonian Energy has said it is looking for a specialist to focus on the nuclear energy sphere and to deal with Lithuanian, Finnish and Estonian atomic power projects.
"It is public knowledge that we are seriously interested in a nuclear power plant. We need a nuclear power project leader because we must have somebody with competence in the nuclear power sphere to focus on the issue and to be able to speak on the subject," CEO Sandor Liive told the business daily Aripaev.
Liive said the need for a project leader was justified considering the Lithuanian and Finnish nuclear power projects. "We are looking into construction of projects there," he said.

"A development project is a very long process. Work has not yet begun in either of the countries. Development will take ten years, but there isn't even a decision concerning construction yet," he added.
"An Estonian project is also topical, but things are not clear in that respect either," Liive said.