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Consumer Ombudsman mulls class action lawsuit over Caruna electricity transfer rate hike

Finnish consumer protection officials say they're seriously considering launching the country’s first class action lawsuit against power distribution network company Caruna. The Consumer Ombudsman is in talks with the utility to persuade it to back down on plans to hike electricity transfer rates by nearly 30 percent on average.

Caruna pääkonttori.
Sähköverkkoyhtiö Carunan enemmistöomistajat ovat kansainvälisiä sijoittajia. Image: Jussi Nukari / Lehtikuva

Finland's Consumer Ombudsman Päivi Hentunen has completed her first round of discussions with the management of Caruna, the country’s largest power distribution company.

The talks aim to persuade the company to roll back a planned rate hike for electricity distribution of up to 27 percent on average. Some customers are facing increases in their bills of as much as 50 percent as a result of the higher transfer fee.

The Consumer Ombudsman told Yle that she has received scores of complaints from Caruna customers over the proposed fee increase. She said that the rate hike also came as a surprise to the Finnish Energy Authority, the body responsible for oversight of the local energy market.

"The Energy Authority is looking at this from the perspective of what is really required for the transformation work. It is following the company’s results. However they have no way of intervening in the price increase and that’s why the Authority is also in favour of amending the law," Hentunen noted.

The Ombudsman was referring to moves by Economy Minister Olli Rehn to introduce a legislative amendment to prevent further dramatic price rises in the future.

Hentunen, who began discussions with Caruna management last Friday, said that a reasonable rate rise would be on the order of 10 – 15 percent. However so far the parties remain far apart on the issue.

Redress via the courts

The Ombudsman said that if she is not able to work out a deal for a lower rate increase with Caruna, she will seek a settlement in court. The vehicle would be a class action lawsuit that private citizens could join.

Caruna currently has upwards of 600,000 customers, but a class action suit could involve a much smaller group. According to Hentunen, both the plaintiffs and the company would be bound by any settlement arising from such legal action.

"It’s possible to seek compensation via the legal system if the courts see fit. But of course it’s a long road," she noted.

It’s been possible to bring a class action suit in Finland since 2008, but so far the law has not been put to the test. Hentunen said that it’s still an important tool that has assisted consumers on many occasions. The possibility of launching a class action suit has significantly improved consumer protection officials’ bargaining power, she noted.

"Finland is a small country and we have a duty to negotiate. Of course the knowledge of the possibility of a class action suit has an impact, for example in cases involving Skandia Life, S-Bank and Finnair. A class action suit is very important from the perspective of consumer rights," Hentunen said.

Caruna has based its decision to raise electricity transfer fees on the need to invest hundreds of millions of euros in laying underground power cables.

Negotiations between Hentunen and the power distribution company are due to continue next week. Before that, Caruna and the Finnish Energy Authority will speak on the matter in the Parliament.

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