Network Operators to Start Buying Loss Energy from Open Market

From January 1st of next year, network operators will begin purchasing the electricity necessary to cover their transmission losses from the open market.

The change will affect the network operators’ costs, and through that, the transmission fees charged to consumers.

The energy loss costs of network operators may increase or decrease, depending on the market price of electricity. However, network operators do not seek a profit from loss energy, and the change in transmission fees will be based exclusively on the actual cost of the loss energy during the previous period.

Until now, network operators have bought the electricity required to offset their network losses at the regulated market price. For network operators, this has been around 30 euros per megawatt-hour in recent years.

A new Common Methodology for Calculating Electricity Transmission Fees has come into effect at the beginning of August. According to this, the price of loss energy is based on the price of electricity in the Estonian price area of the Nord Pool Spot power exchange, as well as the rate of network loss, and averaged out over the preceding 12 months. The costs of purchasing electricity are added on top of this. The correctness of the loss energy cost is verified by the Competition Authority, during the transmission fee approval process. Based on the Statistics Estonia data for last year’s electricity consumption and network losses, as well as the average exchange price of electricity over the last 12 months, the amended transmission fee regulation is projected to increase the total costs of network operators by approximately 10 million euros in 2013, which comes to an average of 0.13 eurocents per kilowatt-hour, VAT excluded. The effect on the individual consumer may vary, depending among other things on the volume and structure of the losses experienced by the network operator that provides their service, the parameters of the consumer’s electricity connection, and the service package.

The amount of electricity that reaches the consumer is slightly less than the amount released into the network by the power stations: in the course of transmission, part of the energy turns into heat and is radiated away by the power lines and transformers, and is thus lost. The network operator must compensate for the loss energy, by buying the necessary amount of electricity every hour.

Across the entire Estonian electrical system, the network losses account for approximately a tenth of the gross consumption.

This notification was composed by Elering AS, Elektrilevi OÜ, Imatra Elekter AS and VKG Elektrivõrgud OÜ.