Many In Estonia Still Unaware Of Imminent Electricity Market Liberalisation

An article first published on this blog on 11th July, 2012.

As we previously blogged about, the electricity market in Estonia, hitherto having been a state monopoly, is due to be open to the market come January 2013, with all the pros and cons that this entails (our previous article lists some of these if you’re interested, or perhaps you already have a view one way or another!).

Nonetheless it seems many Estonians themselves don’t have a strong view on developments, or even worse than that, they’re not even aware it’s happening in the first place!

According to a report by Kristopher Rikken on the esteemed Estonian Public Broadcasting (ERR) site, over 20 per cent of people here are unaware of the prospective privatisation and many more believe there should be more info out there on this subject.

Speaking as a blogger who remembers the fanfare which surrounded the various privatisations of State energy (and other) enterprises under the Thatcher years in the UK, I find this surprising and a real missed opportunity on the part of those companies waiting in the wings to supply electricity to the Estonian people come next January (if in fact they are able to do anything at this stage).

Nevertheless this is the case. Mr Rikken derives his info from a TNS ENOR Poll (we were unable to track down the original poll but here is their Estonian site – TNS is global insight, information and consultancy group) which states that the exact figure of those who are completely unaware of the electricity market liberalisation is 21 per cent, according to the report.

The level of awareness amongst ‘lower income 25 to 34 year olds in small towns’ has risen according to the report, although only 17 per cent of all respondents correctly identified that the changes will affect the price component of their bills (probably adversely in that price increases are likely, although at least consumers are likely to be able to shop around for a better deal from competitors).

Another strange irony is that lack of awareness was particularly high in Ida-Virumaa, the very region of North Eastern Estonia where the bulk of the country’s electricity is generated (in oil-shale burning plants). Moreover ‘non-Estonians’ scored poorly in the awareness stakes, according to the report; this in practice is likely to mean Russian-speaking persons who again predominate in Ida-Virumaa, making up over 70 per cent of the population (and over 90 per cent in some individual towns). Evidently information has either not been provided adequately, or at least disseminated, in Russian.

Furthermore, Eesti Energia as already noted has been particularly helpful in providing information, in Estonian, Russian and English, on what privatisation will mean, presumably anxious to steal a march on its competitors before they enter the market (its Latvian equivalent, Latvenergo, is also poised to enter the market according to the ERR report).

There is still of course plenty of time, it is mid-July and the changeover doesn’t take place until January 2013. However it might be worthwhile for landlords and investors to make a note of the date now and put in place plans for possible savings on energy utilities if they are liable for them.

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Energy Savings Pay Off When Buying Real Estate In Estonia

When buying a new home, it seems that the biggest cost is likely to be the actual purchase price according to property developer Allan Kool, in an article published on Tõnu Toompark’s adaur blog. However, it gradually dawns on home owners that there are other costs associated with home buying which are essential; the most significant of these is energy costs, he goes on.

This article will attempt to make a comparison of apartments with different energy-classes. The two apartments in question are a 2006-built gas central-heated D class terraced apartment with a 2011-built A class apartment, which is being developed by Mr. Kool. In addition a typical family dwelling built in the 1960s, using coal as a heating medium will also be compared (the EU energy performace rating scale runs A-G, where A is the most efficient level and G the least efficient).

With a total area of 133 square metres, the 2006 built energy efficiency D-rated apartment experienced a total heating bill for 2010 of 2 150 Euros, or 180 Euros per month.

The 1960s-built house was classified with an energy efficiency F rating, and at 144 square metres in area cost 2 365 Euros per year, or 200 Euros per month.

By contrast the 2011-built apartment, located at Vuti Street 36/38 in the Kristiine region of Tallinn, the smallest of the three in the comparison at 125 square metres and with an energy rating level A (i.e. the most efficient) had a far lower figure for its estimated heating costs for 2011, at just 800 Euros (i.e. a little under 67 Euros per month).

Thus it can be said that the more efficiently-rated flats actually have heating costs that are over three times cheaper than a less well-rated apartment!

In general, Mr. Kool argues, energy price forecasts are somewhat tentative. He cites the claims of noted Estonian geologist Anto Raukas that energy prices in the future might be as much as three times as high as today. As a result, attempting to protect the return on investment becomes paramount in this situation.

Nonetheless at current price levels the A-rated terraced dwelling maintains a saving of 27 000 Euros over 10 years on that basis when compared with the D-rated property. When compared with the F-rated older family home that figure is even higher, at a 32 000 Euro saving over 10 years.

In summing up, it could be said that energy is a significant issue that directly affects an individual’s income. Costs, especially heating costs, should be thought about very hard when making a purchase in the housing market. A property with a lower purchase price can prove much more expensive in the long term in comparison with that with a more efficient level of energy consumption, thus it is worth paying close attention to the energy rating when buying your home.

The full article (in Estonian) including a table comparing the three properties studied is available here.

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