Other electricity sellers also planning to start offering universal service

  • 2022-08-15
  • BNS/TBT Staff

TALLINN - According to the planned electricity market reform, state-owned energy group Eesti Energia must start offering universal electricity service, but other electricity sellers operating in Estonia also plan to start offering universal service to their customers.

What the actual price of the service turns out to be depends on the electricity generation price established by the Competition Authority, the companies said.

According to VKG Elektrivorgud, important details are being specified in the bill, which means contracted customers cannot be given final confirmation of the service offer. "It is highly likely that all household consumers and apartment associations who have not signed a separate electricity sales contract will receive universal service," Irina Bojenko, PR chief for VKG, told BNS.

According to energy trade portfolio manager at Estonian fuel seller Alexela Kalvi Nou, Alexela is also planning to increase its product portfolio with a universal service package. However, Nou could not comment on what the price of the service will be.

"We do not know that today. It will depend on the price of electricity production established by the Competition Authority and, in addition, how the purchase of electricity from Enefit Power by electricity sellers for universal service users is regulated," Nou added.

Kersti Tumm, head of communications and marketing at energy company Eesti Gaas, told BNS that the company is studying the conditions and if they are suitable and enable to offer the service in an acceptable way, Eesti Gaas also plans to offer universal service to its customers.

CEO of power distributor Elektrum Andrus Liivandi told BNS that the company's customer base in the household consumer segment is around 43,000 customers and, thus, Elektrum is definitely interested in providing a universal service to its customers, however, the final decision will be made once the base price of the service has been approved by the Competition Authority.

Liivand noted that the production price for the universal service will be determined by one of the power plants of Enefit Power, a power generating and oil shale mining subsidiary of Eesti Energia.

"The production price will be calculated based on the most economically efficient production device and this price will be coordinated with the Competition Authority. At this coordinated production price, Enefit Power will have to sell electricity as a fixed supply to Eesti Energia and other electricity sellers if they have expressed a desire for it," he added.

Liivand said that the production price coordinated with the Competition Authority can only be used to provide universal service to household consumers and also to apartment associations. Electricity sellers will add their sales margin to the production price in order to cover reasonable costs related to universal service provision and a reasonable business profit.

"Elektrum's customers have signed their fixed price contracts at a variety of prices depending on the time when they were signed; for example, for customers who signed their fixed price contract a year ago or earlier for three years, the price of the universal service would probably be higher and there is not point for them to change anything. New offers with a fixed price will take the current situation into account, and in this case the universal service may indeed prove beneficial for consumers," Liivand said.

From Elektrum's perspective, the universal service has certain aspects with which the electricity seller cannot quite agree.

"Pursuant to the draft legislation, when changing electricity sellers or changing one's package at one's electricity seller, the existing power contract will be suspended for the duration of the universal service contract and after the universal service contract expires, former contract conditions should be restored. 'Freezing' the old agreement in such a manner will cause a lot of confusion for electricity sellers and they will need to quickly change their customer management systems in a way that enables to monitor the status of customer agreements," Liivand said.

If electricity sellers need to suspend and later resume fixed-term fixed price agreements, they also cannot use the instruments that they normally use to mitigate price risks, he added.

In the coalition agreement signed on July 15, the government coalition of the Reform Party, Isamaa and the Social Democratic Party (SDE) aims to adopt amendments to the Electricity Market Act, which will create an opportunity for household consumers to buy electricity as a universal service from October 1.

For this purpose, Eesti Energia, as the dominant electricity producer in Nord Pool bidding area Estonia, is obliged to sell electricity to Estonian household and small consumers and all electricity distributors at a price that has been coordinated by the Competition Authority and that takes into account carbon emission and other production costs and a reasonable profit.

Chairman of the management board of the state-owned energy group Eesti Energia Hando Sutter told the daily Postimees that the price of electricity, which household consumers will be able to buy as a universal service from Oct. 1, is definitely not going to be cheap and it may happen that the company makes an extension offer to its customers at the end of the contract, which is even more favorable. When asked if the price of electricity as a universal service could be around 180 euros per megawatt-hour, Sutter said that this is indeed the ballpark figure.