Principles of compensating residents for energy costs put on approvals round

  • 2022-09-01
  • BNS/TBT Staff

TALLINN – Minister of Economic Affairs and Infrastructure Riina Sikkut on Thursday forwarded to the Ministry of Finance a draft regulation that will set the terms for the energy subsidies slated to come into effect in Estonia in October.

"Energy prices have remained high both in Estonia and elsewhere in Europe, and unfortunately, no quick relief is expected. Therefore, the state will support household consumers in order to ensure the feeling security and the coping of Estonian residents in these difficult conditions of price increases," the minister said in a press release.

The amounts will be deducted from consumer's bills automatically and no application is necessary. 

According to the draft, the state will compensate household customers for the price of energy consumed between Oct. 1, 2022 and March 31, 2023 in three ways.

Firstly, household electricity consumers will be compensated up to 50 euros per megawatt-hour (MWh) of the average monthly price of electricity, net of VAT, that exceeds 80 euros per MWh. For example, if a consumer buys electricity at a price of 150 euros per MWh, the actual amount charged to the consumer is 100 euros per MWh.

For household gas consumers, the state will compensate 80 percent of the part of the average monthly gas price that exceeds 80 euros per MWh exclusive of VAT. A maximum of up to 2.6 MWh of consumption will be compensated, which equals the monthly gas consumption of an average private home.

For example, if the price during a month is an average of 230 euros per MWh of gas without VAT and the amount consumed is 2.6 megawatt-hours, then after the compensation is applied, the price paid by the consumer is 110 euros per MWh.

As with gas, domestic consumers of district heating will be compensated for 80 percent of the cost of heat above 80 euros per MWh, exclusive of VAT. For example, if the price of heat distributed through the district heating network is 97.15 euros per MWh, the compensation will cut it to 83.4 euros per MWh for the consumer.

For those household consumers who do not receive compensation automatically through energy sellers, the compensation will be paid on the basis of application, which must be submitted to the Environmental Investment Center. Such cases may be, for example, where energy is sold to households in a residential development area by a separate company, a non-profit association or a housing association.

As a result of the subsidies, the average gas consumer's expenses for gas will be reduced by about 50 percent, for electricity by about 21 percent, and for district heating by 14 percent, judging by the example of the largest district heating area.