Electricity elusive for small town firms

Photo: Elmo Riig / Sakala

It’s a vicious circle for lots of Estonia’s rural areas: desiring to develop local business, they cannot afford to build the power networks with voltage needed.

Suure-Jaani parish sent economy ministry a letter telling of their intent to create an industrial zone bordering the town of Suure-Jaani and Kõidama Village. To develop their operations, three local entrepreneurs have signed up – but the region lacks available voltage.  

To power it up, €1.35m would be needed, and the work would go for three years, says the letter. The money issue is putting brakes on plans by parish, and the idea seems dead in its tracks.

Problems of like nature have been faced by several small towns and enterprises in Estonia. On the balances, there lie regional development and network operator’s right to get paid for the service.

Last year, sawmill Combimill Sakala OÜ had recourse to Suure-Jaani parish government to expand their company. However, needed voltage being unavailable, the plan had to be binned.

Thereby, the region lost 35 potential jobs said parish elder Tõnu Aavasalu. In all likelihood, other companies interested in industry will also have to move as talks with Elektrilevi have remained fruitless.

«Building or renewing a regional substation indeed is a very large investment,» observed Elektrilevi communication chief Kaarel Kutti.

«Connecting is not pressing a button, but building a small scale new network,» he said. Combimill Sakala OÜ and Suure-Jaani parish government have wished to connect at 3.5 and 4 megawatts.

As explained by Mr Kutti, building the corresponding electric network would require boosting the networks of both Elering (transmission network) and Elektrilevi (distribution network). Which would require building a regional substation complete with medium voltage line set up on client’s plot.  

«Every now and then, Elektrilevi gets these requests to support some noble cause,» said Mr Kutti.

To bring an example, he mentioned the Sõmerpalu solar park which was built first and only after that they asked for connection offer by the power network. As connection proved too costly and did not suit the business plan, for three years the solar park stood there without being connected to electricity network. As admitted by Mr Kutti: not helping the small enterprises may seem unjust, but the situation needs to also be seen from the power consumers’ point of view.   

«From all users of the network we collect money to service the network, to maintenance it and get the profit allowed by Competition Authority – currently between five and six percent,» noted Mr Kutti (by profit, Mr Kutti means the substantiated cost benefit that the company may earn from capital invested to secure network services – AP).

He reckons that as the connection will be to the benefit of the companies to be engaged in the field, as well as the local government getting its tax revenue, it would be unfair for other electricity consumers all over Estonia to pay the bill.

Mr Kutti said a network operator cannot decide which endeavours to favour. «If a local government wishes to get connected, they probably have good intentions, but we cannot say let’s support a nice idea as, in reality, other consumers will pay,» he underlined.

He said in such cases the state should issue guidelines, such as by exemptions and financing established by the ministry.

«I do not believe in much of anything here,» said parish elder Mr Aavasalu, assessing the current Suure-Jaani outlook. The ministry would probably take weeks to process his application, but the situation does not look promising for the parish.

«The ministry does not have some second purse from which we could support things like that,» said economy ministry’s energy department head Timo Tatar. He proceeded to also underline that the electrical connection sums are not invented by Elektrilevi, but these come according to methodology agreed with Competition Authority – the latter to be addressed in unfair situations.  

The ministry will probably be unable to go lend the parish a helping hand. «We understand the problem and this can clearly hinder business in rural areas, but we have no resources at hand to channel there,» said Mr Tatar.

He said the ministry has pointed out the problem in its new energy development plan yet to be presented to the government. In it, they brought out as a political trend the need to provide regional-policy support to vital regions so business there would not be hindered due to expensive electricity connections.

Competition Authority energy and postal department head Margus Kasepalu said it would make more sense in the given case for the enterprises involved to pay for connection – those who desire to expand or launch operations.

«The parish as such has no need for extra voltage, it’s the specific enterprises who need that,» said Mr Kasepalu. He said the companies also had the opportunity to negotiate with Elektrilevi regarding the time of the connection payment. It would not be possible for the parish, standing alone, to make such deals with Elektrilevi, he noted.

Mr Tatar recalled there used to be a programme for cottages in the woods getting connections to power network, for instance, so as to alleviate the otherwise high costs. But there are no such measures currently employed. In cases like in Suure-Jaani, Mr Tatar advises those desiring to connect to meet with Elektrilevi as somewhere in the rural area spare voltage may be available and perhaps redirected.

Mr Kutti also advised to consider EU means citing the Tapa Industrial Park which got its power connection financed that way.  

Starting this June, connection price with Elektrilevi network will rise by 16 percent to €156 per ampere (VAT included) as the market prices valid since 2008 no longer cover the costs of connecting clients to the power network.