The price of universal service

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. The possibility of providing the universal service is guaranteed for other electricity sellers as well.

The production price of the universal service is calculated on the basis of the three most economically cost-effective production units, which are the Auvere Power Plant, the 11th unit of the Balti Power Plant and the 8th unit of the Eesti Power Plant, all based on fluidised bed combustion technology. On 29 September 2022 the Competition Authority left the electricity production price of 181.83 €/MWh for provision of the universal service of Enefit Power AS without approval and established a temporary production price of 154.08 €/MWh, which is currently valid.

The Competition Authority has the right to establish a temporary production price if the authority does not approve the production price specified in the producer’s application. The temporary price is valid until the producer obtains from the authority approval for the lawful price. The production price comprises the costs of three items of production equipment of Enefit Power AS, and the price includes necessary operating costs, investments, CO2 costs and reasonable business profit.

The price of electricity (which will be paid by consumers) sold under a universal service agreement consists of the approved price of electricity production, plus an additional cost component of the justified costs incurred by the electricity seller in relation to the universal service and a reasonable operating profit. The Competition Authority has the right to verify that the universal service price implemented by electricity sellers complies with requirements. As the universal service is provided by several electricity sellers, consumers may look for the most affordable service provider among all the sellers providing the universal service.

On 31 October 2022 the Competition Authority initiated proceedings of Enefit Power AS's new application for approval of the production price of the universal service for household consumers. On 7 November 2022 Enefit Power AS forwarded an application for approval of the production price of the universal service for micro and small consumers. Enefit Power AS's application for approval for a universal service with different prices for household consumers and micro and small undertakings was not justified in the opinion of the Competition Authority. The current electricity deficit in the market makes it possible to obtain from power plants the technical maximum of their production capacity, therefore, in an energy crisis, it is the responsibility of the undertaking, who is active in a field as vital as electricity production, to keep its equipment in working order and in maximum use. If Enefit Power AS ensures the correct operation of its production equipment based on fluidised bed combustion technology, then the needs of all universal service consumer groups are covered and there is no need to approve separate production prices.