Editorial: on effectiveness of state dissatisfaction

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Photo: Arvo Meeks / Lõuna-Eesti Postimees

The market heavyweight Eesti Energia has been scolded by Competition Authority: at the agency’s preliminary assessment, the energy giant’s general services margin is overly high. General services mean sales of electricity to those who have not entered into purchasing contracts. Compared with exchange package mark-up, the general services’ sum is three times worse – for the consumer.

Even so, before we break into rejoicing over how vigorously Competition Authority defends the ordinary consumer, some facts are to be noted. The sums debated are so small as to make only a tiny direct impact on the consumers’ electricity bills – €0.91 for kilowatt hour with general services, €0.29 with exchange package. VAT included.

No doubt, this is first of all a matter of principle, as also stated by Competition Authority. For how can it be explained that a company’s services margins differ by multiple times? No one would argue the righteous principle: clients are to be treated equally.

Still, it would be overly naive to view Competition Authority’s critique as fight for cheap electricity. For even if EE would take the general service mark-up down to exchange package level, there would be no significant and immediate electricity price drop for consumers. Of course, considering the electricity consumed over time, even small sums eventually add up to big amounts; thus, the reducing of margins would be welcome news for general service consumers. All other energy sellers following Eesti Energia’s price policy cues, there will never be truly cheap electricity.

Characteristically for all reprimanded by supervisors, Eesti Energia has already stated that the agency’s criticism is unfounded and that general services price corresponds to real costs.

The argument is hard to fight, from outside the company. The more so that even Competition Authority will not say what the general services profit margin ought to be. It may be discussed if the mark-up could be equal for all services or not; or what would be a reasonable mark-up, anyhow...

The enterprise is interested in lessening the percentage of non-contract clients like general service consumers, increasing the share of contracts. This corresponds to market logic and would be the thinking of any company. One proven method is lifting the price of an undesirable service so high that the clients will make the rational choice: they will enter the contract.

Even so, the effectiveness of Eesti Energia’s business steps forces us to also consider Competition Authority’s options of being effective: does is or does it not possess leverage to impact enterprises? And if so, to what extent? The agency’s letter to Eesti Energia, sent yesterday, constituted a preliminary decision, to be followed by a precept.

Eesti Energia has the right to contest it in court. Until the courts do their diligent and time-consuming years-long duty, the enterprise can keep on claiming their high margin.