CEO of Energy Industry Jukka Leskelä says that decisions have already been made in several municipalities regarding electricity pricing below market prices. The model does not fit everywhere.
Several municipalities have already implemented the so-called “Kokkola model”, which the general secretary of the Consumers’ Association Juha Beurling-Pomoell announced on Monday In HS’s Suuri eleksäsuora studio discussion.
He urged Finnish electricity companies to set their own price ceilings.
In October, Kokkola Energia introduced a price cap that guarantees the company’s residents living in the Kokkola city area an electricity contract at a price of 16 cents per kilowatt hour. The price realized with the reduced value added tax in December–April is 17.6 cents per kilowatt hour.
“This is not suitable for every company, but such a model could be implemented in many other electricity companies as well. If you live in Kokkola now, you’ve practically won the lottery,” Beurling-Pomoell told HS before the studio discussion.
According to Beurling-Pomoelli, the model could be duplicated especially for municipal electricity companies like Helen. That is, to companies that have their own electricity production and are fully owned by the municipality.
I’m cooking in addition, a similar arrangement was introduced in the autumn also in Seinäjoki and Porvoo, for example, where the local electricity companies do not currently make electricity contracts for people other than the residents of the area.
In Seinäjoki, general electricity costs 15.3 cents per kilowatt hour with 24 percent value added tax. In Porvoo, the price of the general electricity contract is the lowest at 22.62 cents per kilowatt hour with 10 percent value added tax.
In addition, for example, in Ostrobothnia, Herrfors Nät electricity transmission customers are offered an electricity contract at a price of 17.74 cents per kilowatt hour.
So some of the cities have already fulfilled Beurling-Pomoelli’s wish.
CEO of Energy Industry, which promotes the interests of the energy sector Jukka Leskelä says that according to his information, there have been many discussions about similar price arrangements around Finnish municipal companies.
“The municipal owners have certainly already discussed whether they could offer electricity below the wholesale market price, if they have electricity production that would make it possible,” says Leskelä.
“Many electricity companies have kept this kind of cheaper product to a limit in some way.”
A widow electricity companies have a few options in the situation, especially if the company has a lot of customers also outside the municipality in question. One question is whether the electricity company wants to offer a cheap price also to customers living outside their own municipality.
In September, Kokkola Energia announced that it would terminate electricity contracts outside Kokkola that are valid indefinitely. The company currently does not enter into electricity contracts for areas other than the city of Kokkola, i.e. Kokkola, Lohtaja, Kälviä and Ullava.
“Kokkola’s model is one option, which is to offer a lower price than the wholesale market to the residents of one’s own municipality and make a smaller profit,” says Leskelä.
For example, Helen has numerous customers all over Finland. In addition to stock exchange electricity, Helen offers an electricity contract that costs only 41.75 cents per kilowatt hour.
Another option is to take the profit made by production as dividends to your municipality and use this money in other ways in the municipality’s economy.
“It may be that the municipal owners feel that it is better to take income from electricity production and use it in their own municipality than to take a smaller income.”
The third option is to let the electricity company keep its profits and direct the money to, for example, clean energy investments.
“The solution can also be a combination of these,” says Leskelä.
Part of electricity sellers is not connected to electricity production. Such electricity sellers buy electricity from the wholesale market and sell it to customers, in which case, according to Leskelä, adjusting the price ceiling would not be possible.
“You have to remember that not all municipal corporations anymore have activities such as electricity sales and not all that have sales have production, so this kind of activity is not possible everywhere,” says Leskelä.
Price ceiling in addition, Beurling-Pomoell of the Consumers’ Association demands a definition of affordable electricity.
“Every Finn has the right to reasonably priced electricity. The problem is that this affordability has not yet been defined. The Energy Agency is now making this definition. We are dismayed that it is only now being done because it should have been done in good weather,” Beurling-Pomoell said.
According to Leskelä of the energy industry, the matter has been quite clear for the electricity companies. According to Leskelä, the idea of a reasonable price was originally that electricity would not be sold at a higher price to customers who are unable or unwilling to tender their electricity contract.
According to Leskelä, a reasonable price came up in the discussion when electricity sales were opened to competition. At the time, the idea was that, in general, the competition would keep prices low.
“However, there are households that do not have the know-how or desire or ability to tender for an electricity supplier. For these customers, there is always a seller responsible for delivery, that is, someone has to sell them electricity, even if they do not compete in their contract. We wanted to make sure that lazy or incompetent customers would not be overcharged. The price had to be reasonable compared to other products on offer.”
According to Leskelä, a reasonable electricity price means that the price that must be delivered should not be significantly more expensive than the market price, i.e., in practice, electricity on the exchange.
“Now we’re looking for something such that the reasonable price is in relation to something else, i.e. what people can afford or what the price used to be,” says Leskelä.
At the moment some electricity sellers only offer exchange electricity contracts to new customers. Exchange electricity is, for example, a delivery obligation product offered by Helen.
The Energy Agency has several investigation requests pending regarding electricity with a delivery obligation and their reasonable price, as well as whether the seller can only offer exchange-traded electricity as a delivery obligation product.
Director responsible for the market Antti Paananen The Energy Agency tells HS that, for example, the agency cannot set a general, directly binding electricity price ceiling for all retailers in advance.
“The agency’s competence in these investigated matters is case-specific and ex post facto. This means that the agency can retrospectively assess and decide with a decision whether the actions of an individual retailer with regard to electricity with a delivery obligation were in accordance with the law,” says Paananen by email.
#Electricity #Kokkola #model #electricity #cheaper #market #prices #localities