Futures prices, at exchange, would dictate that next year’s electricity be cheaper than that of today. Even so, in its fixed-price offers, Eesti Energia asks for bigger money that a year before.
Eesti Energia offers higher price
22nd November 2013, 16:30
Please note that the article is more than five years old and belongs to our archive. We do not update the content of the archives, so it may be necessary to consult newer sources.
The one-year offer is dearer than last year, by €0.15; meanwhile, longer-term offers have become less expensive. Judging by this, Eesti Energia seems to be trying to quietly impose higher prices on those who entered into one-year contracts, in 2012; or to tie them with longer contracts.
Even though private persons are free to cancel electricity contracts any time, no fines, very few do that. According to Elering data, only 2,784 people changed electricity providers in November – less than a percent of all contract holders.
Cheaper options exist
According to Eesti Energia’s products chief Karla Agan, the company may offer prices up to half a cent cheaper. That’s up to volume of consumption, as well as faithfulness to pay bills.
The same is true regarding any electricity provider, as offers may come under price list figures. Even so, as many a home-owner will testify, sellers of electricity aren’t overly eager to make offers and lure private clients. Thus, the bulk of people are hostages to pricing by Eesti Energia.
Private persons are free to change electricity providers monthly. Should the fixed-term contract expire on December 31st, it can be extended – or else, people can select a new provider with nicer price. For customers of Eesti Energia, the deadline for accepting extending-offers is December 10th. Should the client fail to react to the extending-offer, the contract will automatically be prolonged for one more year, on conditions offered by the company.
According to price comparison portal energiaturg.ee, about 250,000 fixed-term contracts will expire this year, entered for one year in 2012. Should somebody want to cancel the contract and opt for a new provider, it is worth noting that the contract must be terminated at least a month in advance i.e. on November 30th.
With Elektrum, the notice time is shorter – 21 days – but, alas, their market share with home users is small.
For people who have entered contracts without a term, there’s no need to worry about this. «The bulk of 220 Energia clients are users of no-fixed-term exchange packages, who have discovered the cheapest exchange margin in Estonia and, by that decision, gained from market liberation in 2013,» said the 220 Energia chief Marko Allikson.
Eesti Energia advises its clients to opt for fixed-price contract, claiming willingness to offer stability and simple/understandable service, as well as spreading costs evenly.
No market player expects big price jumps on electricity exchange. Rather, in foreseeable future, the price will remain at the current level – averaging €45 megawatt hour. Probably, the higher price for short term contracts points to an attempt to make a quick buck.
«Electricity retail-price does not depend on futures prices alone; very important factors being activities of competitors, consumption volume/schedule of definite customers, and market situation. Therefore, retail prices cannot be compared with futures prices alone,» commented Mr Agan.
Markup stays same
With packages linked to exchange prices, mark-ups basically have stayed the same – and small. «There have basically been no changes to exchange price margins. While last November Eesti Energia had it at €0.29 kWh, then by now it's a bit higher, at €0.32,» commented energiaturg.ee chief Moonika Kukke.
220 Energia exchange mark-up for non-prepaid exchange package, last November, was €0.25; soon it fell to €0.24 kWh and has stayed at that.
«As the market opened up, sellers set mark-ups close to minimum, therefore there’s not much room to lower it. Also, ranks of exchange-packet-users have not grown much over the year – by some 5 per cent,» noted Ms Kukke.
The trend for exchange prices, in foreseeable future, seems to be downwards. The latest 2014 futures prices stood at €42.2 megawatt hour. Major providers like Eesti Energia indeed enter futures contracts for most of the electricity sold, thus hedging themselves from possible price hikes at exchange.
According to Mariana Maidla, analyst at Nordic Power Management, futures prices are financial instruments, not end-consumer prices. As compared to former years, this year’s ten month price has stayed medium. Last year, it was higher, the last but one – lower.
The benchmark pools of Norwegian hydro stations, however, are at under-average water level currently, meaning the price should be above average. «In addition to hydro station reservoirs, futures prices are impacted by other factors; an important one would be price levels, which, despite low water-levels, are being suppressed by comparatively low consumption and comparatively high production at nuclear stations,» commented Ms Maidla.
For the electricity exchange, analysts predict certain stability of prices. Come New Year, the market will have access to Estlink 2 maritime cable, the 650 megawatts of which ought to totally even out price levels of Estonia and Finland. In 2015, the Sweden-Lithuania sea cable should be completed, also serving to bring Nordic hydro power and stable-priced nuclear power closer to the Baltics, hopefully evening out prices for the entire Baltic Sea region.
In Europe, coal prices are falling – pressed down by decreasing imports from China and the American shale gas boom. Despite of threats by European Commission, there are no clear signs of a more stringent climate policy, which might raise the CO2 pollution quota prices (currently close to €4). Thus, upward pressure is not to be expected from there, either.
«Thanks to Estlink 2 being completed, starting next year Estonian electricity market will be a part of the Finnish one. As a producer, Eesti Energia will no longer have any advantage,» said Mr Allikson.
Comment
Aivar Reinap, Postimees
As the electricity market opened up, I opted for one-year contract with Eesti Energia, and with this choice I’m totally satisfied. Eesti Energia’s exchange package exceeded mine in eight months out of ten; over a year, I have won €37 i.e. seven percent of electricity price. Here, I’m not considering transmission fees.
To choose next year’s package, I got busy some time ago: entering my data into the Elering database, I hoped the 48 open market players would rush to compete for me. I proved a simpleton: no storm arose. A couple of companies did contact me, advising me to check the tariffs at their websites, but that was all. There were no serious offers made to lure me off Eesti Energia. Even the aggressive-looking Latvians’ price was far higher that with Eesti Energia.
Thus, the option remained: exchange package or the one offered by Eesti Energia. This year, Eesti Energia is forcing the 2-year contract, which clearly has the cheapest tariff. Considering that, in my case, the cheapest offer meant 3.8 rise as compared to what I pay now, I leaned towards a package better fixed. If, even with the current weather, electricity price rises 4 per cent over a year, I’d like to freeze them for a longer period.
Thus, this time I opted for three year contract, which, as compared to the cheaper-tariff two year one, will be dearer for me by €9 over a year. Even so: I may rest assured they will not be surprising me by price hike again, next year. And, should a miracle happen and electricity prove fall, I can enter a new and more favourable contract any time.