The Competition Authority confirmed new Elering transmission charges applicable from 1 April 2022

The higher electricity power exchange price has increased the expenses of Elering for compensating physical network losses arising upon the supply of electricity to consumers sharply from 12 million euros to 35 million euros. The impact of the increase in the price of electricity purchased for compensating network losses is around one euro for supplying the monthly electricity required by an average household. In order to alleviate the pressure for increasing the network fees, the company will also pay fewer dividends to the owner than planned.

After thorough proceedings that lasted nearly nine months, the Competition Authority confirmed the new Elering transmission service charges on 28 December. The new charges will apply from 1 April 2022.

Even though Elering does not provide services directly to households, the change will increase expenses for the distribution networks and thereby probably also affect the fee for supplying electricity to the final consumer. If the electricity consumption of an average household were 250 kilowatt-hours per month, the expenses on supplying electricity to this household may increase by one euro per month.

The last time Elering raised the transmission service charge was in 2013. Thereafter, the charge has been lowered twice, in 2014 and in 2017, respectively.

Taavi Veskimägi, Chairman of the Management Board of Elering, explained that Elering is the biggest electricity consumer in Estonia and it purchases nearly twice the amount of electricity for compensating the physical losses arising from the supply of electricity to consumers than the second biggest electricity consumer in Estonia.

“Naturally, at this volume of electricity use, the more expensive electricity price affects us significantly, as expenses on electricity network losses constitute the biggest single expense in our budget. In Estonia, network charges are cost-based and therefore, when expenses on the transmission of electricity increase, it means higher network charges for covering these expenses. Elering has no other financing sources for covering the expenses related to network activities in addition to the network charge. In the last nine months, the Competition Authority conducted a thorough analysis on the basis of which all parties should be assured that all the expenses made by Elering for the transmission of electricity have been repeatedly inspected and they are fully justified,” said Veskimägi.

While Elering spent 12.2 million euros throughout 2020 on the purchase of electricity for covering physical network losses related to electricity transmission, 35 million euros are needed for compensating the purchase of the electricity required for compensating network losses in 2021. Taking into consideration the electricity future transaction prices in the Estonian region in 2022, Elering could incur expenses required for covering network losses at a level of nearly 50-60 million euros in the next year. In the last 12 months, Elering has purchased nearly 400 gigawatt-hours of electricity for covering the losses related to electricity transmission.

Network losses are the biggest type of expense in the transmission network, even exceeding the total amount of operating expenses by more than 10 million euros in the new charge period. The latter expenses inter alia include all costs related to operating the electricity network and performing regular maintenance.

Network losses are an inevitable physical occurrence in relation to the transmission of electricity. These losses are above all incurred in relation to the warming of power lines and equipment. The losses account for approximately three percent of all electricity transmitted via the electricity transmission network. However, the electricity network losses are very low compared to the losses incurred in numerous other physical processes. For example, in the case of an internal combustion engine of a passenger car, the losses are nearly 70 percent.