Electricity producers give warning of possible hikes in retail prices

Wholesale prices rose sharply early in the year

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The Association of Finnish Energy Industries (ET) is warning that the retail price of electricity could rise. According to ET Managing Director Juha Naukkarinen, there are pressures to raise the prices of both electricity and district heating.
      Naukkarinen says that the pressures for higher prices exist, in spite of a sharp increase just last year, and in spite of very good results by electric utilities.
     
Fortum, which is half-owned by the state, achieved the best result of all Finnish power companies last year. Its business profit percentage - the percentage of its turnover that constitutes business profit - was an excellent 35 percent.
      Helsinki Energy, which came in second, had a business profit of 22 percent of turnover.
      Other electric utilities also did quite well; the whole sector achieved good profits, which has sparked claims among critics of a lack of competition.
     
The most successful electric utilities were the ones that generated a large proportion of their own electricity. The weakest results were from companies that focused on distributing electricity from the wholesale market.
      The results of many of the companies were boosted in recent years by income from the sale of carbon dioxide emission rights that were allocated to them for free by the state. Because of the large amount of water in reservoirs, many companies did not have to use all of their emission rights, and were able to sell them on the open market.
      For instance, Fortum earned EUR 26 million from selling emissions rights. And Helsinki Energy got EUR 13 million. Pohjolan Voima, which provides electricity for heavy industry, earned EUR 56 million from the sale of carbon dioxide emission rights, but because it sells electricity at cost price, the benefit went straight to the corporate customers, and was not reflected in the company’s own bottom line.
     
Naukkarinen nevertheless sees pressure to increase prices of electricity for end users, because market prices in Nord Pool, the Nordic electricity exchange market, have risen sharply in the early part of the year. Futures rates have risen to more than EUR 50 per megawatt hour, after staying at the EUR 30 level for a long time.
      The Nord Pool regional price for Finland was about 80 percent higher than at the same time last year.
      According to Naukkarinen, the Nordic exchange price of electricity is affected especially by the water supply in reservoirs in Norway and Sweden, where hydroelectric power accounts for a large percentage of the energy mix.
      The amount of water in the reservoirs is currently close to normal, but it is set to weaken considerably, because the small amount of snow this winter means that there will not be the normal amount of snow melt to replenish the reservoirs.
      This, or some other factor, has raised Nord Pool prices so much that they have even exceeded the prices on the German electricity exchange, which is very exceptional.
      The phenomenon has again raised debate on the function of the Nordic market, and competition.
      Minister for Trade and industry Mauri Pekkarinen (Centre) last Friday asked Matti Purasjoki, former head of the Finnish Competition Authority, to examine conditions for competition on the electricity market. Suggestions are expected to come from Purasjoki in the early autumn.


Previously in HS International Edition:
  Vanhanen denies "pressure" from Russia on undersea electric cable issue (3.4.2006)
  National power grid operators of Finland and Sweden disagree on restrictions to exports of electricity (27.2.2006)

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