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Entrepreneur suggests Finnish-linked price ceiling for electricity exchange, ministry of economy cautious.
Ministry minded to restrict electricity market
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Ministry of Economic Affairs is preparing to write an amendment to avoid future electricity price hikes to the tune of the post-Midsummer shock of megawatt hour costing close to €104. According to MEA vice chancellor Ando Leppiman, the incident will have to be examined by Competition Authority.
«Should the exchange prove unable to ensure a harmonised pan-Baltic model, with negative effects to the Estonian customer, the need for an amendment is to be considered,» stated Mr Leppiman.
Already now, however, Mr Leppiman detects three major problems requiring more definite regulation.
«Does the Competition Authority possess sufficient rights to inspect the transmission system operators?» is how Mr Leppiman puts the first problem. According to him, the price hike may have been partly caused by the Lithuanian TSO, which, for whatever reason, loaded the Lithuanian-White-Russian power line with 1300 MW transmission with only 80 MW worth of power.
According to Mr Leppiman, it needs to be found out why the Lithuanians acted that way. He underlined that Lithuanian, Latvian and Estonian competition boards must do more to inspect the TSOs activities.
The second problem, which the ministry would like to regulate, is maintenance repairs at major power station. One reason for price gone wild being repairs at big stations, causing production capacity to fall both in Estonia and Lithuania.
«As it is, everybody assumes that around Midsummer Day consumption should be low, so they will launch repairs, but somebody should collect information on all maintenance planned and regulate when and to which degree the power stations may halt their operations,» said Mr Leppiman.
«Whose task is it?» asked Mr Leppiman. «Nord Pool Spot (electricity exchange – edit) says this is their trading platform, networks ensuring the transmission and securing the supplies.»
The third problem is political by nature: the exchange needs to work uniformly all over the Baltic States. The electricity exchange Nord Pool Spot being voluntary, power stations need not sell unto the exchange and are free to do direct deals.
The Baltic problem being the big monopoly-like producers: Eesti Energia and Latvenergo. According to Mr Leppiman, Nord Pool Spot ought to force major players unto the exchange, to make the market more effective.
He said not all energy produced by Latvian and Lithuanian stations is sold to unto the exchange. «I am not trying to accuse Latvia and Lithuania; I am just pointing to where the problem begins,» said Mr Leppiman. «If Latvia and Lithuania are not selling to the exchange, then we will also have to consider if it is prudent for Eesti Energia to sell all of its electricity unto the exchange.»
Mr Leppiman says the avoidance of exchange by Southern neighbours is most severely felt in summer, when the Estonian-Latvian border is able to transmit all electricity needed. As Estonia’s production together with Estlink sea cable can cover the entire consumption with electricity to spare, and the southernmost cable in constant transmission mode, a so-called joint Baltic market is created, with Latvian-Lithuanian deficits pushing the price up.
At the same time, Mr Leppiman was very hesitant with the idea of equipping the exchange with a price ceiling.
In the opinion of River Tomera, head of the Estonian electricity trader Elektrimüügi AS, the price ceiling would be a necessity. Mr Tomera says that as Finland has sufficient connections to various countries, it must be assumed that the Finnish price equals fair market price. Thus, Estonia’s electricity price ought to be linked with the Finnish price.
The current exchange price ceiling stands at a «mythical» €2,000, Estonian exchange also having had its hours of a price like that. The reason is said to have been the naiveté of the traders, who forgot to note price ceiling on the purchase order. Bidders took their chance, pumping hourly price to €2,000.