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 Consumption Limits In Estonia To Get Stricter

According to a report by Ott Tammik on the Estonian Public Broadcasting (ERR) site, stricter energy consumption limits are to be set for buildings in Estonia for next year, 2013.

The announcement was made in a draft mandate from the Ministry of Economic Affairs, according to the report.

The ultimate goal for the state is to have ‘near zero energy buildings’ by 2021, which in practice means a limit of 50 Kilowatt hours (KwH) of energy consumption per square metre per year, for every building, the report stated, although it is believed that this target will be met two years earlier than that.

The current limit is 180 KwH per square metre per year, set to be reduced to 160 KwH per square metre per year from next year, the report said.

Presumably the limit will be reduced by small increments until the 50 KwH target is reached.

The original article (in Estonian) which ERR cites outlining the announcement is from Estonian national daily Postimees, here.

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Estonian Electricity Market To Be Opened Up To Competition

As of 1 January, 2013, Estonia’s electricity supply market will be privatised and opened up to competition thus making it one of the last erstwhile state monopolies in Estonia to be privatised.

As a result, electricity prices will be set in accordance with the Nord Pool spot power exchanges, which comprises some 350 electricity suppliers in the Baltic Sea region, rather than set by the state.

It seems likely that the change might lead to some initial increase in prices. According to the Eesti Energia website, who currently have the monopoly on electricity supply, “..the average exchange price in 2011 suggests that a household with an electricity bill of 15 euros per month would have to pay an extra 2.5 euros per month. This also includes the change in VAT”.

The open market does not affect the electricity excise and renewable energy fees because these are calculated from the electricity consumed, the Eesti Energia website stated.

However, since the quantities of electricity traded on the Nord Pool exchange are vast, measurable in Megawatt hours (MWh) rather than Kilowatt hours (KWh) and change on an hourly basis, it is impossible to accurately forsee electricity prices after this liberalisation, the Eesti Energia website went on.

If a householder does not indicate a preference as to supplier after January 2013, they will not be cut off but rather their electricity will be supplied by a ‘universal service’ based on the average power exchange price from the previous month, the Eesti Energia website states.

Naturally, the increased competition and range of choice available to customers suggests more competitive prices being offered in electricity supply in the future, although electricity prices on a global scale are increasing.

Goodson & Red Tallinn Property Consultancy is a premier residential and commercial property service based in Tallinn, Estonia, with a strong focus on consultancy services for overseas property investors. Our recent media accolades include mentions in both the UK quality newspaper the Daily Telegraph, and the New York Times.

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