Government agrees on new energy price compensation measures

Prime Minister Kaja Kallas (Reform) and Center Party leader Jüri Ratas. Photo: Eero Vabamägi

The government reached an agreement on a universal price of electricity alleviation measure on Thursday. Recent targeted measures will also be retained, with a part of people relying on electrical heating able to turn to their local government for help.

The Reform Party and Center Party agreed to lay down an electricity price ceiling of 12 cents per kilowatt-hour for monthly consumption of up to 650 kWh. The ceiling applies to both market and fixed-price contracts. Customers who have fixed the price of electricity at a lower price point are unaffected.

However, electrical heating can mean that one’s monthly consumption greatly exceeds 650 kWh. Middle-income families whose monthly consumption is over 650 kWh can still turn to their local government for support as recent measures will be retained. High-income families that consume over 650 kWh of electricity will have to pay their own way.

“The power bill of a private residence in Nõmme that relies on electricity for a lot of its heating was €566 in December,” a consumer (identified) told Postimees. The household consumed around 1,180 kW of day tariff and 990 kW of night tariff electricity, with the price at 27.5 cents per kWh and 15 cents per kWh respectively. “The coalition’s price ceiling (€0.12/kWh) for 650 kWh of consumption would lower the bill by €125 euros to €440 VAT included,” they said.

Local governments’ workload is expected to fall as many families are looking at considerably lower bills in January. The price cap measure will remain in place for January, February and March.

Recent measures also include the state paying half of people’s power transmission fee.

The new measure will see the state compensate service providers automatically for prices in excess of 12 cents per kWh, with no action required from the consumer. The €0.12/kWh price cap is before VAT.

Service providers told Postimees that the measure’s details nor what exactly is required of them has not reached them yet.

Hefty power bills for October, November and December remain unaffected, with only low and middle-income families eligible for support from their local government.

The government also decided to introduce a price ceiling for natural gas at €65 per MWh for home consumers. The state will compensate 100 percent of the price beyond that for a maximum monthly consumption of 2.75 MWh.

Consumers will be billed for cubic meters of gas consumed with the conversion done by the service provider that will forward a part of the bill to the state.

One cubic meter of gas can yield approximately 10.55 kWh of energy. An average Tallinn apartment heated using gas requires roughly 1,050 cubic meters or 11.1 MWh of gas a year.

How to square bills sent to apartment associations should become clear on Tuesday.

The new measures are forecast to cost €80 million.

Minister of Public Administration Jaak Aab (Center) said that while neither side was completely satisfied, that is the measure of a good compromise.

It took the government days to agree on new measures, with the situation referred to as a looming government crisis after the Center Party took its ideas for additional measures to the media before consulting its coalition partner. Prime Minister Kaja Kallas (Reform) described Center’s tactic as a populist race. Center’s initial proposal was to compensate all consumers for 50 percent of bills that Reform considered too expensive.

Kaja Kallas said on Thursday that while talk of a government crisis can now be put to bed, the new measures are short-term and the energy crisis far from over, meaning that long-term agreements are still needed.