A tough proposal from the ministry on the price of electricity – this is how it would affect the electricity bills of homes

The Ministry of Labor and Economic Affairs has sent a draft law for opinion, which would enable regulation of the price of electricity during the electricity price crisis.

“The law on the regulation of electricity prices is necessary in order to be better prepared in advance for possible energy crises. It gives households and small entrepreneurs protection against unreasonable price increases, if we end up in a situation similar to the one at the beginning of Russia’s energy war in 2022” Sari Multala (kok) says on the website of the Ministry of Labor and the Economy.

During price regulation, the term of validity of fixed-price electricity sales contracts offered by the electricity company to end users would be limited to a maximum of one year.

“The proposed price regulation and limiting the duration of fixed-term fixed-price electricity contracts to a maximum of one year reduces the consumer’s risk of being exposed to unreasonably high prices,” says Multala.

According to the Ministry of Labor and Economy, the price ceiling could be used in an exceptional and long-lasting situation.

“Occasional and short-term price peaks can be considered a normal feature of the electricity market. In exceptional cases, however, the price of electricity can be higher than usual for a long period of time, which makes it especially difficult for low- and medium-income people living in electrically heated single-family houses or townhouses to make ends meet,” says the ministry’s website.

During price regulation, households and small businesses would pay a lower price for electricity than the prevailing market price.

The household price ceiling would be based on the previous year’s consumption. The customer would receive electricity at the regulated price in an amount that is no more than 80 percent of the consumption in the same month of the previous year.

The draft law has estimated the financial effects that the change could have on different types of households. The estimate has been made for an apartment building (annual electricity consumption 2,000 kilowatt hours), a small house without electric heating (annual electricity consumption 5,000 kilowatt hours) and a small house with electric heating (annual electricity consumption 18,000 kilowatt hours).

The calculated impact assessment of the draft law uses the differences between the market price and the price ceiling of 1 cent per kilowatt hour, 10 cents per kilowatt hour and 20 cents per kilowatt hour.

According to the draft law, the set ceiling price of electricity without value added tax should not fall below the price, which is 2.5 times the average price of the previous five years in the Finnish offer area of ​​the electricity exchange.

The proposal includes a subsidy ceiling that would limit the maximum amount of subsidy to be paid.

“At its maximum, the size of the support for households and small businesses would be the product of the difference between the support ceiling and the ceiling price and the electricity consumption eligible for support,” says the draft law.

The ceiling price, subsidy ceiling and their application period would be regulated by a separate fixed-term law.

The electricity company would be reimbursed from state funds for the difference caused by supplying electricity to its customers at a regulated price.

The comment period for the draft law ends on March 8.