Estonian Electricity Market Opens In 2013

Triniti

As of January 1st, 2013 the Estonian electricity market will be fully open. While the market opening will cause most of the electricity contracts of the consumers to legally terminate transition mechanisms are in place to ensure that households and smaller business consumers will not be left without electricity.

Until the end of this year the electricity market is open only to eligible consumers who use at least 2 gigawatt hours of electricity a year*, accounting for at least 35% of the total electricity consumed annually. The rest of the consumers will have a chance to choose the electricity seller most suitable to them soon in the autumn, but the concluded contracts will enter into force starting from the next year when the government will no longer regulate the price of electricity – it will be set on the free electricity market.

In June this year the Estonian parliament amended the Electricity Market Act (EMA) and added a new subclass of consumers to the law – small consumers. According to the EMA, small consumers include household consumers, associations of flat owners and those business consumers whose electrical installation is connected to the network at low voltage via a main circuit breaker of up to 63 amperes. This change is the reason why smaller business consumers do not have to worry about their electricity supply with the arrival of 2013.

A general service is secured for small consumers

On the open electricity market, electricity sellers will no longer have the selling obligation, which will cause the electricity contracts made under the current selling obligation to terminate, and in order to continue consuming electricity consumers should enter into a new electricity contract with an electricity seller. Since it would be too optimistic to expect that all the consumers will enter into a new electricity contract by the end of this year, amendments to the EMA contain the so-called transitional provisions to make sure that the consumers are not left without electricity. The transitional provisions are built on the foundation of the general service regulation.

The general service is the right of small consumer to buy electricity from a network operator whose network the consumer’s electrical installation is connected to at a reasonable and justified price which adheres to the principle of equal treatment.

The price of electricity sold as a general service is calculated on the basis of the hour-based electricity quantities and the weighted average price of the hour-based electricity prices quoted on the electricity exchange. The justified expenses related to the provision of the general service and reasonable commercial profit shall be added to the price.

Smooth transition to a fully open electricity market

With the introduction of the general service regulation and the definition of a small consumer into the law, the sharp distinction between a household consumer and a business consumer is made less distinct, as certain business consumers are regarded equal to household consumers. This is important because the state has an obligation to ensure electricity supply to more vulnerable consumers and make transition to a fully open electricity market, that is, to the internal European Community electricity market, as smooth as possible.

To that end a regulation will be imposed to make sure that small consumers are not left without electricity if they have not entered into an electricity contract by the time the market opens or if a small consumer’s electricity contract terminates after the market has opened, and they are not required to enter into an open supply contract or buy electricity at the price of balancing energy, instead they will have a chance to buy electricity as a general service.

However, the general service regulation does not apply to those business consumers who do not qualify as small consumers and for them entering into electricity contract is a must if they do not wish to consume electricity at the price of balancing energy. The price of balancing energy may be higher than the market price due to the obligation of the network operator, to whose network the consumer’s electrical installation is connected, to maintain a balance between the amount of electricity purchased and/or supplied to the network by an electricity market participant and the amount of electricity sold and/or acquired from the network by an electricity market participant during a trading period.

Thus, those companies whose electrical installation is connected to the network at low voltage via a main circuit breaker of up to 63 amperes and who have not entered into an electricity contract by the time the electricity market opens, will not be left without electricity as the electricity market opens – they will be entitled to buy electricity as a general service, leaving them one less thing to worry about.

* For comparison: the annual consumption of an average private house is about 0.005 gigawatt hours.

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