Call for radical electricity market overhaul and sixth nuclear reactor

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Matti Purasjoki, the former director-general of the Finnish Competition Authority, is calling for extensive changes in Finland’s electricity market. Purasjoki, who was appointed by the Ministry of Trade and Industry to examine Finnish energy policy, called for the construction of a sixth commercial nuclear reactor.
      In a report submitted to Trade and Industry Minister Mauri Pekkarinen (Centre) on Tuesday, he also proposed scaling back the powerful position of the electricity producer Fortum.
      In Purasjoki’s view, Fortum should divest itself of Finnish hydroelectric plants. He also said that Fortum should pull out of the nuclear power company TVO.
      In Purasjoki’s view, there is not enough competition in what he sees as the oligopolistic electricity market in Finland and the Nordic countries; even though competition authorities cannot prove the existence of any actual cartel arrangements, companies in the sector are nevertheless in close cooperation, with full knowledge of each other’s production and price structures.
      He says that competition does not work as it should, because those places where supply is inefficient also cannot have sufficient competition.
      Producers are unwilling to make investments, because greater supply would lead to lower prices.
     
As a solution, Purasjoki proposes the establishment of a new state-run company separate from Fortum. Shareholders would include the state, municipalities, as well as companies that use large amounts of electricity.
      As he sees it, the company could operate in a manner similar to that of the electricity producer Pohjolan Voima, which sells electricity to its shareholders at a discount, at little, if any profit.
      The new company could start out by planning a sixth nuclear reactor. Finland currently has four reactors in operation, and a fifth is being built in Olkiluoto on the west coast - the location of two of the others.
      At the same time, Purasjoki feels that it would be important to assess the possibilities for setting up new hydroelectric generating capacity in Finland.
      In Purasjoki’s vision, Fortum would continue as a listed company, but it would sell off its domestic hydroelectric plants. He says that Fortum’s powerful position on the market largely stems from hydroelectric power, giving it considerable power to influence the price of electricity.
      He concedes that his proposals would be politically difficult to implement; an auction of hydroelectric plants would probably require the passage of special legislation, in the form of a constitutional amendment.


Previously in HS International Edition:
  Russian undersea electric cable proposal receives mixed reception (3.10.2006)
  Rising political stars reject NATO membership and expanding nuclear energy (9.8.2006)
  Russia to build new nuclear reactors on shore of Gulf of Finland (18.5.2006)
  Electricity producers give warning of possible hikes in retail prices (11.4.2006)

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