In recent years, Latvia has managed to reduce the electricity price difference with other Baltic neighboring countries, as reported by Enefit Chairman Janis Bethers.
“Although Latvian households still pay the most for electricity, these expenses will continue declining. The price difference with Estonia, which historically has the lowest wholesale prices, has declined nearly 2-fold,” says Bethers.
According to him, analyzing electricity costs in every Baltic state, it is clear that new connections and integration of Baltic electricity market into Scandinavia’s energy market, as well as reviewed tariff structure, has brought a positive result in Latvia.
But the question remains topical if Latvia can create competitive electricity costs without relying solely on electricity price decline, but rather focusing on continued reduction of other components.
“A major decline of electricity costs in Latvia was secured by the reduced price on the wholesale market, which was thanks to last year’s established NordBalt cable between Lithuania and Sweden. This provides cheaper electricity for Latvia and Lithuania and helps equalize price differences with Estonia,” says Bethers.
At the same time, electricity prices on Latvia’s and Lithuania’s open markets have dropped significantly over the course of the past year.
He also notes that neither Latvian nor Lithuanian households have yet to experience any major positive changes. Latvia’s market does not have sufficient competition, which is the main factor for price changes on an open market. Only some households use products using prices tied to the exchange.
Lithuania still has regulated prices. Because of that, households’ electricity expenses are 27% and 20% lower in the comparison with Latvia and Estonia.
“Lithuanian politicians stand before brave decisions, because it is clear that electricity prices included in the regulated tariff do not comply with the actual situation on the market and are heavily subsidized,” adds Enefit manager.
While the fluctuation of electricity prices is a global process, the second half of the price component – connection service – is affected by local decisions and each country’s choices.
“This is proven by the fact that all Baltic States have reviewed their transmission system tariffs and have introduced fixed connection fees, which has resulted in immediate changes for electricity bills. Compared with average transmission service costs, Lithuanian households’ payments to their transmissions system operators are the smallest,” Bethers says.
He says it is important to find a solution to reduce MPC pressure on electricity price level and resolve the matter entirely, not keep it divided among different consumer groups. (BNN/Business World Magazine)
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