Elering applies for four per cent reduction in electricity network charge

Elering has submitted an application to the Competition Authority to reduce the average network charge by about four per cent, which, when approved, will mean that the company’s network charge for the last three years will have fallen to approximately 11 per cent.

The exact extent of this round of reductions in network charges will be determined after approval of the new charges by the Competition Authority. Elering hopes to implement the charges from July this year. “The reduction in the transmission service charge will probably also be reflected in each consumer’s electricity service bill for some time, and savings for consumers will amount to millions of euros a year,” said Chairman of the Elering Board, Taavi Veskimägi.

One reason for the reduction in the network charges is the fall in the weighted average cost of capital (WACC) to 4.46 per cent. This is a third lower than at the time of the previous reduction in the tariff, and cuts Elering’s operating profit by nearly 13 million euros to 28 million euros. “The regulatory capital price has already fallen to an abnormally low level and made investments in energy security of supply unattractive to network operators,” explained Veskimägi.

In addition, the reason behind this fall in network charges is the reduction in waste energy costs and a significant reduction in network assets in the tariff.

Elering’s operating expenses will fall by two per cent. However, maintenance costs for the EstLink connections and emergency reserve power stations have been added, and as a result of the approval of the law, toleration payments to landowners will increase.

Furthermore, Elering is significantly reducing investments in the electricity grid. Where investment in replacements totalled 27-30 million euros in the period 2004-2014 and 21 million in recent years, over the next three years Elering is planning to invest only 18 million euros per year in the replacement of old equipment.

Elering last changed the network charges in spring 2014. Then, there was also a reduction – the average network charge fell by 7.8 per cent.