Analytics, Energy, Latvia, Society

The wholesale prices of electric power have been constantly declining in the Baltics and over the past year they have dropped by nearly one fifth, a small drop can be seen also in households' overall bills. At the same time, subsidy payments supporting renewable energy producers are maintaining significant differences in Latvia, Lithuania and Estonia. Also, each country has chosen a different policy for power distribution tariffs, which make up nearly half of the electricity price. Such conclusions follow from analysis of electricity prices for households, Enefit said.

According to the Enefit report, Lithuania still hesitates to open its electricity market to households who are still buying electric power for regulated prices, which are significantly lower than in Latvia and Estonia. Over the year, the electricity price for Lithuanian households had dropped by 23 percent. At the same time, Lithuania has managed to significantly reduce support to large combined heat and power (CHP) plants, thus cutting the total expenses on the mandatory purchase component (MPC).

In addition to a lower electricity price and reduced MPC payments, Lithuania historically has the lowest power distribution tariff. As a result, the electricity price in Lithuania is approximately 30% lower than in Latvia and 20% lower than in Estonia, which is quite odd, given that the wholesale price in Lithuania is the highest in the Baltics, Enefit representatives said.

As for Estonian households, their expenditure on electricity this summer has not changed much as compared to the situation a year ago as the electricity price has dropped by just 5.4% over the year.

Meanwhile, Latvia has kept its position as the Baltic country with the highest electricity price, sustained primarily by MPC payments, which in Latvia is nearly twice as high as in its neighbor countries. The situation in Latvia is expected to change somewhat as the new distribution tariffs of Sadales Tikls take effect on August 1. The new tariffs, however, are not going to have a very big effect on the household segment, as they are expected to influence the electricity price mainly for the corporate segment.

Lithuania's power links with Sweden and Poland, which was put into operation earlier this year, have not helped close the gap in wholesale prices between Latvia and Estonia. Likewise, Latvia's leading power supplier is selling electricity to households for prices that are 5%  higher than those in Estonia.

The greatest differences among the three Baltic states are created by the way each of them has chosen to support various energy generation projects. Latvia is the most generous supporter of its large CHP plants, but all three Baltic states are working to reduce the burden of MPC payments for end users.

Founded in 2006 and fully owned by Estonia's Eesti Energia, Enefit sells electricity in the open Latvian electricity market.