Congestion income does not constitute profit or revenue for Elering but a fund for financing investments
The so-called congestion income received by Elering and Fingrid in Finland arising from differences in Estonian and Finnish exchange prices does not constitute profit or revenue recognised in the income statement of Elering. Instead, it is a specific charge received in a separate fund whose foremost objective is increasing the transmission capacities at the borders.
According to Taavi Veskimägi, CEO of Elering, congestion income is not profit or revenue recognised in the income statement of Elering and its owner cannot disburse these funds from the company. “The possibilities for using congestion income are provided in the legislation of the European Union and the Competition Authority exercises supervision over its use. The objective of congestion income is to collect funds into a separate fund for increasing the transmission capacities. For example, when we build Estlink 3 or the third Estonian-Finnish interconnection, we are able to use these funds without increasing the fees for the consumers.”
Elering is using congestion income for renewing transmission lines running on the north-south axis in Estonia, increasing cross-border transmission capacities, and, for example, building the third Estonian-Finnish interconnection in the future.
“For example, we use congestion income for renewing the lines beginning in the Narva region and the lines leading to Latvia near Valga within the framework of the synchronisation project. Elering also used the same source of financing for creating the third Estonian-Latvian interconnection. Thanks to congestion income, it was not necessary to involve the money of Estonian electricity consumers in the synchronisation project or the new Latvian interconnection project,” explained Veskimägi.
“Whereas doubt has been cast on the necessity of the Estonian-Latvian third electricity connection, without this connection, we could not connect Estonia with the electricity system of Continental Europe or connect new renewable energy production capacities to the Estonian electricity system.”
Congestion income also allows offering risk management instruments for all market participants, above all electricity traders, serving as a prerequisite for providing more feasible electricity packages on the market for final consumers. A similar instrument has already been used for Latvia for years. Elering has completed the preparations for applying a similar instrument on the Estonian-Finnish border. The decision on applying the instrument will be made by the Estonian and Finnish energy market regulators.
Elering earned a total of 65 million euros of congestion income on Finnish and Latvian borders in 2021. The same amount was earned jointly on the borders by the Finnish system operator Fingrid and the Latvian system operator AST.