Eight important things to know about the world of energy

There is still tension in the air. The following thoughts have been written down in order to reduce it and to increase understanding.

1. No-one is forcing the universal service on you

Electricity sellers transfer or have automatically transferred to the universal service only those household consumers for whom electricity is more expensive than the universal service.

If you, as a consumer, have received a universal service offering but do not wish to accept it, you must inform your electricity seller. Also, you can switch to the universal service at any time.

2. The price of electricity is not just made up

Broadly speaking, each consumer has chosen one of the following three: exchange-rate, fixed-rate or universal service electricity.

Exchange price of electricity is formed in the market where electricity sellers place bids. The price will be cheap if energy from renewable sources (solar, wind, water, nuclear) covers the consumption. If there is not enough renewable energy, power plants using coal, oil shale and gas will enter the market. Due to strict environmental requirements, the electricity produced there is many times more expensive, thus raising the exchange price.

Consumers who buy electricity at a fixed price are not affected by the daily fluctuation of the power exchange. A price that does not change during the agreed period is paid for electricity. However, if the exchange price of electricity is high, so is the purchase price of electricity, which is why electricity sellers are currently offering fixed electricity at a much higher price than consumers would like.

The universal service is regulated by the state, and the electricity production price is approved by the Competition Authority. Every electricity seller adds their justified costs, a reasonable business profit and VAT to that production price. To the dismay of many consumers, universal service does not provide cheap electricity. This is because according to the order of the state, universal electricity is produced in oil shale plants which are known to be associated with extremely high environmental taxes. Since the production price is variable, the universal service price may vary over time.

3. The choice of an electricity package depends on your consumption habits

When making a decision, consider the following points:

  • If your current price of electricity is fixed below the universal service price, it is reasonable to continue with it until the end of your contract period, thus keeping your energy costs firmly under control.
  • If your current fixed price of electricity is more or less the same as the universal service price, then it is worth waiting a few months and observing whether the universal service price rises or falls, and then make a choice.
  • If you can’t decide whether to continue buying exchange-price electricity or not, you should think about your consumption habits. If you can divert your home electricity consumption to cheaper hours, the power exchange will be beneficial. If power consumption management is not possible for you, universal service will provide you with price certainty.

4. The power exchange is more beneficial than harmful

Estonia covers a large part of its electricity consumption itself, but not all of it. Some of the Soviet-era production facilities have outlived their time and have been shut down. Although renewable energy units have been added, it is not enough. Cables transporting electricity between countries help to cover the shortfall.

If we leave the power exchange, our neighbouring countries will not fail to respond. If we don’t contribute ourselves, why should other countries want to supply us with electricity in the event of a deficit, or why should Latvia want to store our natural gas reserves?

5. The state supports household consumers this winter as well

The state will compensates part of household customers’ expenses for electricity, gas and district heating, regardless of the package or energy seller. The support measures are valid from 1 October 2022 to 31 March 2023 and are automatically applied to bills. Local authorities can provide information about their additional subsidies.

The state compensates household consumers up to 5 c/kWh for electricity that costs more than 8 c/kWh, excluding VAT. The state compensate 80% of the final price of gas for household consumers exceeding 80 €/MWh (excluding VAT), for up to 2.6 MWh of consumption per month. In order to alleviate the price of heat distributed through district heating networks, the support measure stipulates compensation of 80% of the cost of heat at a price of more than 80 €/MWh (excluding VAT).

6. Electricity bills have three components: electrical energy, network service, renewable energy fee and electricity excise duty

The cost of electricity depends on the price at which electricity is purchased and how much it has been consumed. By purchasing electricity at a fixed or universal service price, you can plan your monthly energy costs in advance.

The network service fee goes to the network service provider for delivering electricity to consumers and for maintaining and developing the infrastructure.

The renewable energy fee and electricity excise are state taxes. The first of them supports the development of renewable energy in Estonia, the second one finances environmental protection.

The amount of both network service and state taxes depends on the amount of electricity consumed.

7. The energy crisis is not delaying the green revolution

The current situation requires wise choices, and the green revolution must be accelerated instead. Enefit has set itself the goal of ending oil shale electricity production by 2030 and to produce electricity only from renewable sources from then on. In the production of liquid fuels, oil shale will gradually be replaced by waste plastics and waste tyres by 2045.

8. Only one offshore wind farm and 120 onshore wind turbines are missing

Only one offshore wind farm and about 120 onshore wind turbines are needed for the 2030 green revolution of electricity. Many of these projects are already underway at Enefit’s subsidiary Enefit Green: a wind farm and solar park are being built in Purtse, the wind energy areas in Sopi and Tootsi are being prepared, wind farms in Risti, Põlendma, Siiraku and other places plus the offshore wind farm in the Gulf of Riga are under development. Renewable energy investments must not be postponed. This is the only way we can ensure affordable, green and accessible electricity.

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Reader asks: “What does an electricity bill consist of?”

Electricity is an integral part of our lives – we need it whether we’re at work, walking down the street or doing domestic chores. As the electricity bill we receive each month has a direct impact on our monthly budget, it is only natural that people want to know exactly what they are paying for when they use electricity.

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