Annual Report 2021

We are happy to introduce the next yearbook of the Estonian Competition Authority, which summarises our activities in 2021. We saw that the pandemic that began in early 2020 really marked the end of a period of calm – this year was not smooth sailing, either. We have been living under the influence of the pandemic for two years but hopefully, we will see the end of it in the coming autumn. We all know that predicting the future is very difficult, but looking at history, one can hope that the virus will become a common seasonal flu and that vaccination will prevent a larger outbreak.
The Estonian Competition Authority exercises state supervision in the fields of competition, electricity, natural gas, district heating, postal services, public water supply and sewerage, railways, and ports. In addition, the Authority resolves disputes and complaints related to airport and port charges and monitors unfair commercial practices. The Authority is in the area of government of the Ministry of Justice.
The Estonian Competition Authority participates in the work of working groups and associations in various fields of activity. Most of the international communication takes place through various cooperation networks and organisations, but also in the form of bilateral relations.
Monopolistic undertakings will pay a supervision fee

On 1 January 2022, an amendment to the Competition Act entered into force, pursuant to which part of the budget of the Estonian Competition Authority is financed by supervision fees paid by monopolies with regulated prices. The purpose of the amendment is to better ensure the ability of the Estonian Competition Authority to perform additional tasks and to enhance supervision by providing additional funding.
In 2021, one of the keywords in competition supervision was the transposition of the ECN+ Directive. This directive is one of the most fundamental reforms of EU competition law in the last decade. It aims to streamline and harmonise the way Member States deal with infringements. It is necessary to implement especially extensive changes in the Estonian legal system, because our procedural system has historically been quite different from the solutions traditionally used in Europe.
Control of concentrations and the functioning of competition

Ex ante regulation of concentrations plays a crucial role in the functioning of competition. The control of concentrations can prevent anti-competitive mergers and acquisitions and thus the creation of a dominant position (including a monopoly).
Outcome of price regulation

When assessing the effectiveness of price regulation, the dynamics of regulated prices in real terms are used as a measure – this eliminates independent effects (e.g., the price of fuel in the case of district heating or the price of electricity in the case of network service). These inputs are formed under free market conditions and cannot be changed by economic regulation. In addition, the Authority monitors the efficiency of energy use in electricity and district heating networks and in heat production, with the aim of reducing energy losses.
Electricity consumption in Estonia with grid losses is 8,966 GWh per year. Final consumption, excluding network losses, is 7,847 GWh, of which 26.3% is accounted for by household customers. Domestic production accounts for 6,312 GWh of the electricity balance, imports for 7,464 GWh, and exports for 4,832 GWh. Electricity consumption is expected to continue to grow, as the degree of electrification is increasing in various sectors.
Consumption of natural gas in Estonia in 2021 was 5,089 GWh/year(1), of which 9% or 468 GWh was consumed by households. Gas consumption in Estonia has been falling over the years and, due to the high price of gas, a further decline in consumption and a switch to alternative energy sources can be expected. Unlike in Western Europe, natural gas does not play such an important role in heating buildings. District heating is the most common form of heating in Estonia, where the use of gas has declined over the years and, at the high prices of today, will continue to do so.
Unlike the price of electricity and gas, the price of district heating is not determined by market conditions but by the Competition Authority. District heating consumption in Estonia is 4,200 GWh per year. There are 159 district heating districts with a maximum heat price approved by the Competition Authority, of which 125 have a sales volume of less than 10,000 MWh per year. 
There is no competition in water supply and the price is coordinated by the Competition Authority. A water company is a company with a very strong monopoly over an important resource. In view of the legislation, the water network is to a certain extent similar to the electricity network – it is not reasonable to build a parallel network and there are very few examples of competing pipelines. In addition, the local authority determines the water company on its territory.
The Competition Authority is developing measures to eliminate discriminatory or otherwise unfair treatment in the rail services market. It is also one of the important tasks of the Competition Authority to deal with complaints made by railway undertakings.
The postal sector has been characterised by changes linked to digitisation, which have gained momentum in recent years. There has been a gradual but significant decline in the use of traditional mail. Forwarding of shipments is increasing as e-commerce volumes grow.