2023 was an active year for supervisory proceedings over the prices of regulated services. As fuel prices fell, the Competition Authority proactively sent out memoranda to undertakings to reduce regulated prices. In 2023, the total number of price proceedings was 298, plus responses to price-related inquiries. The biggest impact of the price drop was on the maximum prices of heat.
The maximum price of heat changed in 2023 in 129 network areas, of which, as of the end of 2023, the maximum price decreased in 116 network areas and increased in 13 network areas. At the same time, the Competition Authority approved the maximum price of heat on more than one occasion in many network areas, i.e. a total of 250 decisions were taken during the year on the approval of the maximum price of heat (including in 236 cases the maximum price for the final consumer). While the largest reductions in maximum prices were more than twofold and occurred in individual network areas producing heat from 100% natural gas, the maximum price of heat dropped by more than 15% in 81, i.e. almost half, of the network areas. On average, the maximum price as approved by the Competition Authority decreased by 12% during 2023, which meant a cost level reduction of almost 40 million euros in the average heat supply of 175 network areas compared to the approved maximum prices of heat at the end of 2022. As of the end of 2023, the selling price of heat in some of Estonia’s major cities stayed below the agreed maximum price, to the extent that it reduced said cost level by an additional 10 million euros.
The above reductions in heat prices were possible due to the decrease in input prices for fuels (natural gas, wood chips, shale oil, etc) and electricity used in heat production in 2023 compared to 2022.
Thus, while fuel costs and other variable costs accounted for a very large part of the price of heat in 2022, the share of investments in heat prices has steadily increased during 2023 (the share of variable costs has decreased from 71% in 2022 to 65% in 2023).
As of the end of 2023, the Competition Authority has approved the electricity network charges for 29 distribution network operators with an annual total sales volume of electricity network service of 7.858 GWh and a weighted average network charge of 4.13 cents/kWh. In 2023, the Competition Authority approved the change in electricity network charges in ten distribution network areas, with a decrease in network charges in several large network areas (a price drop of 7% and 8% occurred respectively in the network areas of Imatra Elekter AS and OÜ VKG Elektrivõrgud). This meant a reduction of almost 1.8 million euros in costs for these network areas compared to 2022. As a weighted average, the network charge in Estonian distribution networks remained essentially the same in 2023 (down by 0.27% by the end of 2023), as the application for price increase by the largest network operator Elektrilevi OÜ was still pending at the end of 2023.
The chart below also shows the relation of the change in electricity exchange prices to the number of and reason for price applications for electricity network services submitted to the Competition Authority in 2022 and 2023. If in 2022, due to high electricity prices, the main reason for submitting applications (35 in total) was a change in non-controllable purchase prices (for example, the cost of electricity transmission and/or distribution service to be outsourced, the cost of electricity to be purchased to cover network losses, the cost of purchasing reactive energy, etc) (so-called short application), then in 2023 applications (8 in total) were submitted due to a change in price components (sales volume, operating costs, investments, etc) requiring a more thorough analysis (so-called full application), since in addition to changes in electricity prices there have also been significant changes in other cost components over the years.
In 2023, a change in the price structure in the network charges of the transmission network operator Elering AS was approved, with the aim of fairer distribution of transmission network maintenance costs between different customer groups. The size of the average transmission network charge was not affected by the change in the price list structure.
Changes in the price of the natural gas network service were approved by the Competition Authority in 2023 for 20 distribution network operators (in most areas repeatedly, i.e. 62 in total). The main reason for the increase in the price of the network service in the gas distribution networks was the significant increase in the price of the network service of the transmission network operator Elering AS, which in turn was triggered by the significantly reduced gas consumption in Estonia, so that the price so far did not cover the cost of maintaining the working order of the gas network. Several gas distribution networks also applied for a price change due to a change in gas consumption in their area. However, the end of 2023 shows a trend of some recovery in gas consumption.
Price changes for public water supply and sewerage services (water services) were approved/determined by the Competition Authority in 2023 in the licensed territories of 36 water undertakings. At the same time, the price of water services fell in several operating areas of water undertakings due to the fall in electricity input prices in 2023. For example, price reductions (up to about 1/5) in larger areas included licensed territories of regional as well as county centre water undertakings in Ida and Lääne-Viru County, Põlva County, Tartu County, Jõgeva County and others. This meant an overall reduction in costs for consumers in these licensed territories of around 2.5 million euros compared to 2022. As a weighted average, the price of water services for Estonian water undertakings as of the end of 2023 turned out to be somewhat (about 7%) higher than in 2022, insofar as the costs associated with investments and operating costs increased.