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Consumer watchdog reaches deal with Caruna on gradual price hikes

Finland's biggest electricity grid operator Caruna on Thursday backpedalled on its plans for stiff price increases on March 1. Instead rates will rise slowly over the next year, with no further increases before 2018.

Päivi Hentunen
Consumer Ombudsman Päivi Hentunen of the Finnish Competition and Consumer Authority Image: Yle

The Finnish Competition and Consumer Authority (FCCA) announced on Thursday evening that the electric grid company Caruna has agreed to phase in its planned price hikes more gradually.

Caruna will raise prices on a step-by-step basis by lowering basic electricity distribution fees by a quarter until the end of February 2017. The firm also promises not to raise prices further before 2018.

The compromise was reached in the company's negotiations with Consumer Ombudsman Päivi Hentunen of the Finnish Competition and Consumer Authority. That followed a firestorm of public outrage over sharp rate hikes planned for March 1. The company said the increases were essential to bankroll improvements such as moving electric lines underground to avoid blackouts caused by storms.

The firm, Finland's largest of its kind, has a monopoly in much of southern and western parts of the country as well as in part of Lapland. Formerly owned by the majority state-owned Fortum, the grid company was sold off to mostly-foreign investors in 2014. Yle reported in early February that – thanks to creative accounting – the company only pays 1.6 percent tax in Finland.

Ombudsman: "Excessive and unreasonable"

In early February the Consumer Ombudsman declared that Caruna’s price hikes were "excessive". She said it is not reasonable for prices under a long-term contract to be raised by more than approximately 10-15 percent at a time. Caruna was planning to knock price up by an average of around 30 percent – with some customers facing abrupt rises of considerably more than that.

"What makes Caruna’s price hikes especially unreasonable is the fact that electricity is a necessity that consumers cannot live without. Switching to another supplier is not an option for consumers either, as Caruna has a monopoly on electricity transmission in its area," her office said.

The Ombudsman suggested that unless an agreement was reached, Caruna might face Finland's first-ever class action.

Price rises to average €23-140 a year

A statement issued by Caruna on Thursday quotes CEO Ari Koponen as saying: “We understand our customers’ concerns, and have listened to the feedback we have received from them very carefully. We have thoroughly examined the method by which we can have the network improvements-based measures that are required by the law appropriately handled. At the same time, we have obtained a reasonable solution for our customers with the Consumer Ombudsman which fulfils the requirements both of the Electricity Market Act and the Consumer Protection Act. This outcome is the fairest of all for our customers – it benefits them immediately and reduces our earlier reported price increases to a level acceptable to the Consumer Ombudsman.”

The firm says that the average annual rate rise for Caruna households will be less than 15 percent of their taxable total of the electricity distribution share. It estimates that a flat-dweller who uses 2,000 kilowatt-hours of electricity annually will see a yearly increase of about 23 euros. Those in detached homes using 18,000 kWh will see costs go up by around 140 euros a year.

The authority says there is no longer any need for a class-action suit.

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