The Energy Agency’s decision to rationalize electricity transfer pricing in the new control model for the years 2024–2027 and 2028–2031 put almost all electricity network companies on the back foot, when the companies decided to apply for an amendment to the agency’s decisions in the market court at the end of January.
It is already known in advance that there will almost certainly be a battle over the transfer prices of electricity all the way to the Supreme Administrative Court, because the party that lost in the market court will appeal the matter.
According to various estimates, this takes between two and four years.
ECT agreement as a basis
Now the rounds on the matter are accelerating. Finland’s largest network company Caruna’s institutional owners US private equity firm KKR (40%), Canadian Teachers’ Pension Fund Ontario teachers’ pension plan (40%), a Swedish pension fund AMF (12.5%) and a pension insurance company How much (7.5%) appealed the Energy Agency’s model to the ICSID, an arbitral tribunal under the World Bank.
The question of whether the Energy Agency’s decision violated the rights of international investors is extremely interesting. The basis for the complaint is the investment protection or ECT agreement signed by Finland, which regulates international agreements in the energy sector.
For example Fortum has challenged On the basis of the ECT agreement, to the arbitration court of the Russian state, because Russia illegally confiscated Fortum’s assets in the country.
Is past performance a guarantee of future performance?
For Caruna’s owners, however, there is no question of confiscating assets or preventing operations.
It is a question of whether the Energy Agency’s decision to rationalize, i.e. lower, the revenues of electricity network companies is a matter where “the state changes its legislation unpredictably from the legislative environment to which the state has previously committed itself”.
The Energy Agency has been given full authority to regulate the profit level of monopoly companies in the electricity network.
Within the framework of EU legislation and Finland’s own laws, the Energy Agency has been given full authority to regulate the profit level of electricity grid monopoly companies.
Is the previous rate of return allowed for the companies so set in stone that the state, i.e. the taxpayers, will have to pay possible compensations for changing it?
Finland is an example
Time will tell, but only in three or four years. Professor of energy law in an interview with Yle Kim Talus says that despite investment protection, states have the right to change the regulation of the energy market. “Every operator knows that changes can be made to the regulation.”
Finland is now acting as an example in the ICSID process, the consequences of which in terms of ECT protection have to be weighed throughout the EU.