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Energy authority asked to investigate spot-price-only electricity contract offers

Finland's power firms have been adjusting their pricing after energy supply issues struck earlier this year. 

Wind turbines produce power when the wind blows, but leave a gap when the weather is calmer. Image: Juuso Stoor / Yle

The Energy Authority has been asked to look into power firms' pricing changes this year, as efforts to manage consumption have focused on shifting households onto demand-based spot price contracts.

Those contracts link prices for electricity to the wholesale spot price, which is determined by demand. In practice, that means electricity is cheaper in the middle of the night and more expensive during morning and evening peak usage.

Helsinki energy firm Helen has announced it will raise prices by 60 percent on its fixed price 'until further notice' contracts in December, at the same time as it announced profits had tripled year-on-year between July and September. 

Helen's director of sales and customer service, Anu Elina Hintsa, told Yle's A-Studio programme that the price increases are prompted by renewed concern over sufficiency of supplies after Russia's attack on Ukraine, and the cost of electricity on the futures market. 

"It's also good to recognise that when the level of futures starts to fall, contracts will react to that, so there will also be price drops in future," said Hintsa. 

Helen said it also wants to invest in wind power and the green transition, which will help ensure prices are a little more stable in the future. 

What is 'reasonable'?

The Energy Authority is now being asked to judge what a 'reasonable' cost of electricity might be. 

That's because Finland's electricity law demands that energy firms "shall deliver electricity at reasonable prices to consumers", meaning that the dominant firm in any area has an obligation to offer at least one contract type to anyone who wants it — and the cost must be 'reasonable'.

Helen said on Monday (siirryt toiseen palveluun) that it had received several complaints about firms that are offering spot-price contracts as their obligated contract to new customers, with complainers wondering if this meets the 'reasonable' provision in the legislation (siirryt toiseen palveluun)

The authority has never before been asked to adjudicate what is a 'reasonable' cost.

"In this case it will be necessary to weigh up whether the [price is based on] retail operation profitability, or whether it should have a relationship to for instance market or wholesale prices," said the authority's director, Antti Paananen.

If the Energy Authority decides that firms have not sold electricity at a reasonable price, the company can be required to fix its pricing according to the law. 

Paananen did not estimate a timescale for dealing with the complaints, but said it would not be resolved this year at least.

Spot price contracts on the rise

At present customers changing contracts have the option of spot-price contracts, or fixed-term contracts. 

Hintsa said that it would be good if more people switched to spot-price contracts, as that would help balance demand. Wind turbines produce a lot of very cheap electricity, but it is concentrated in stormier periods.

Likewise usage peaks in the morning and evening, and if that were spread more evenly power would be cheaper for everyone. 

"Then the prices would be lower for everyone, as electricity would be used more in those moments when there is a lot of production and less when there are gaps in production," said Hintsa. 

As of 8 November, the Helen website was offering a fixed-term deal with electricity at 33.43 cents per kilowatt hour, or a spot price contract where each kilowatt hour came at the spot price at the moment the power was used, plus 0.38 cents.

Paananen said that the Energy Authority had also received requests to investigate whether spot price contracts could be the only option offered to new customers. 

"From a markets perspective spot-price contracts have certain uses," said Paananen. ""Of course it demands a certain amount of activity from customers in turning things off when electricity prices are high," said Paananen. 

He adds that the current ceiling on spot-price contracts is "really high", at four euros per kilowatt hour. Last year some nine percent of electricity contracts were linked to the spot price, but Paananen said that has probably increased this year. 

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