New energy legislation enters into force: ceiling on unreasonable increases in transmission fees from start of September, natural gas market to be opened up to competition in 2020
Unreasonable increases in electricity transmission and distribution fees will be restricted from 1 September 2017, and wholesale and retail natural gas markets will be opened up to competition at the beginning of 2020. These changes to the Electricity Market Act and the Natural Gas Market Act are part of a legislative package* passed by Parliament during the summer. The President of the Republic is to approve the new energy legislation on 25 August 2017.
Ceiling on unreasonable increases in transmission fees
A provision restricting unreasonable increases in electricity transmission and distribution fees has been added to the Electricity Market Act. Fee increases will be subject to an annual ceiling of 15 per cent. This amendment enters into force on 1 September 2017.
The ceiling provision does not give the right to repeated 15 per cent increases. As a result of the changes the kind of excessive rises seen previously will not be possible. The profits of the transmission and distribution companies overall will continue to be regulated by the Energy Authority, which can intervene in the event of violations.
The changes to the Electricity Market Act also improve the prospects that distribution networks operating in sparsely populated areas will be able to obtain extra time for implementing their reliability investments. The Energy Authority may grant such a distribution network extra time to meet the reliability requirements after the end of 2028, but not beyond the end of 2036.
In particular, the changes mean that the possibility of extra time also applies to distribution networks in which investments to improve reliability will continue to be made in sparsely populated areas mainly by means of overhead lines. The changes will apply to distribution networks which have an average of more than 200 metres of distribution network per consumption user site. This will reduce the additional costs of reliability investments for distribution networks operating in sparsely populated areas and therefore reduce the need for increases in customers’ distribution fees.
Natural gas market to be opened up to competition at start of 2020
For more than 40 years the natural gas consumed in Finland has come from Russia via pipelines. Opening up the markets allows diversification of the supply of natural gas in Finland, as in the future the alternatives to piped Russian gas will include, besides biogas and liquefied natural gas, purchasing natural gas from the Baltic States and, after completion of the connecting pipeline between Lithuania and Poland, from Central Europe.
The new Natural Gas Market Act will open up Finland’s wholesale and retail natural gas markets to competition at the beginning of 2020, when the Balticconnector pipeline connection from Finland to the Baltic States’ gas networks will be completed.
The transmission network of natural gas transmission system operator Gasum Ltd will be unbundled from gas production and sales by 2020 in a manner to be determined that accords with the so-called effective unbundling model in the EU Directive on the internal market for natural gas. This will ensure that, in regard to new entrants to the market, the transmission network operator acts as a neutral party maintaining the marketplaces, and that the development of the natural gas transmission system and market are guided by a comprehensive perspective on the market as a whole.
Increased competition in the supply of natural and renewable gas will create opportunities for the companies in the sector and for gas users to diversify their procurement. New business opportunities will emerge for companies in the sector. It will also be easier for new suppliers to enter the market. Competition will serve to create a more efficiently functioning market and will bring cost savings in the long term.
The aim is also to improve the competitiveness of natural gas. There will be less regulation concerning wholesale and retail sales and distribution and, for the most part, the specific regulation of natural gas pricing will be abolished.
The natural gas market legislation will enter into force on 1 January 2018. The provisions concerning the transmission network operator’s unbundling and the opening up of the natural gas market to competition will enter into force on 1 January 2020, following a transition period.
*The legislative package passed by Parliament includes the new Natural Gas Market Act, the Act on Unbundling the Activities of the Natural Gas Transmission Network Operator, the Act Amending the Act on the Control of the Electricity and Natural Gas Market, the Act Amending the Electricity Market Act, and the Act Amending Section 2 of the Act on Excise Duty on Electricity and Certain Fuels.
Arto Rajala, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 29 506 4828
Jyrki Peisa, Special Adviser to the Minister for Housing, Energy and the Environment, tel. + 358 50 364 0836