Dear Reader,

It is a pleasure to present the Competition Authority’s 2023 Annual Report. Here you will find a comprehensive overview of our efforts and achievements in the past year to protect open markets and ensure fair pricing in Estonia.

The Postal Act stipulates that, regardless of the speed of forwarding, at least 90% of ordinary letters using the domestic universal postal service must be forwarded to the recipient within the stipulated time. Thus, in one or three working days, respectively. In order to verify compliance with this requirement, the Postal Act stipulates that the universal postal service provider ensures that compliance is inspected by a person independent of the service provider.

Ensuring reliability of heat supply to consumers is one of the most important obligations of the heating undertaking. Russia's war against Ukraine put the natural gas market under severe pressure throughout the European Union. For example, natural gas supplies to EU Member States have been reduced, and taking into account the demand to pay for gas supplies in rubles, which contradicts the sanctions against Russia imposed by the European Union, the sale of Russian gas to companies located in several member states has ceased.

In relation to the drastically increased heat price, the Competition Authority requested an action plan from AS Utilitas Tallinn that would reduce dependence on natural gas and lower the price of heat for consumers.

According to the action plan presented by the undertaking, the first priority is the use of waste heat (adding additional scrubbers) in the undertaking's cogeneration plants. According to the authority, these are necessary investments that must be implemented as soon as possible, presumably by the upcoming heating season.

According to the Competition Authority, the heat supply in the Tallinn district heating areas of Adven Eesti AS (Kesklinn, Pirita, Nõmme and Põhja-Tallinn districts) where heat is produced only from natural gas, was not economically efficient and did not meet the expectations of consumers to buy thermal energy at a reasonable price. Heat prices have risen significantly in these network areas.

The beginning of 2022 brought gas prices down to between 70 and 100 €/MWh, but unfortunately the period of low prices didn't last very long. Russia's military aggression against Ukraine significantly disrupted the global energy system. This led to difficulties due to high energy prices and increased concerns for energy security, highlighting the EU's overdependence on gas, oil and coal imports from Russia. To solve the problem, steps were taken to reduce energy dependence on Russia.

The Competition Authority conducted an analysis¹ in order to ascertain the risks concerning the independence of Elektrilevi OÜ from the Eesti Energia AS group. With the current developments, the activities of Elektrilevi OÜ as Estonia's largest distribution network operator are becoming increasingly important in the organisation of the electricity market.

An inquiry among electricity sellers revealed that there are approximately 70,000 consumption contracts with exchange packages in Estonia, where the calculation is based on the monthly average exchange price, not the hourly exchange price. Consumers using such a package may not always be aware of it. The Competition Authority recommends that electricity sellers increase customer awareness and, if the customer so wishes, enable the customer to switch to hourly price calculation.

According to the analysis¹ of Estonian, Latvian and Lithuanian energy regulators, the steep increase in the electricity price on the Nord Pool power exchange on 17 August 2022 was a result of a combination of different factors along with the peculiarities arising from the small size of the Baltic market. The analysis identified no violation of market rules.

On 15 September 2022 the Riigikogu approved at the third reading amendments to the legislation, on the basis of which electricity sellers will be able to sell electricity to household consumers as a universal service, ie a service with a regulated price approved/established by the Competition Authority, from 1 October. The draft act amending the Electricity Market Act and the Competition Act obliges Eesti Energia AS to also sell electricity to household consumers and electricity resellers as a universal service from October 2022 until the end of April 2026.