What does my electrical distribution invoice consist of?
The electricity network works like a telecommunications connection – you pay for the bandwidth and not for how much data is transferred. Likewise, the road network is available whenever you need it. In the electricity distribution fee, you pay for the existence of the electricity network, and for as much electricity as you need to be available whenever you need it.
Of every euro you pay, nearly 70 cents are used to improve the network and to provide the network service to our customers. The amount of transmitted energy only impacts around 20 per cent of the costs.
The electricity distribution price consists of the basic fee and a part based on electricity consumption, as well as a possible power-based demand charge. The costs of electricity distribution arise mainly from the construction, development and maintenance of the network and from financing of these areas. The amount of energy used has little effect on these costs. As a result, the share of the basic fee in the distribution fee is high and the variable consumption fee is lower.
In addition, electricity tax is collected on the electricity distribution invoice, which is forwarded to the state.
With the distribution fee, you get all the services related to electricity network operations
The electricity distribution fee (the network service fee) includes customer service, electricity metering service, a 24/7 fault reporting service, fault repair in all situations, as well as staff wages and ICT costs. The fee also covers electricity network maintenance, development and construction of the new network, as well as modernisation of the old network to meet the needs of the future.
What is the connection charge?
The connection charge only covers the costs of connecting to the network, i.e. the construction of the actual electricity connection.
The price of electricity distribution
Usually, the price differences between electricity distribution companies are due to the amount of network property in relation to the number of customers. Customer prices are lower, when more customers share the value of the network property (metre per customer). Network property means the total value of electricity network components of the network company.
For the 492,000 customers of Caruna Oy, the network length per customer is considerably larger: 165 metres. Depending on the type of housing, the electricity distribution tariff is in the most expensive quartile.
The price of electricity distribution for Caruna Espoo Oy's 245,000 customers is among the cheaper fifth, because the network is largely modernised, and more city residents are sharing the costs of the network in a densely populated area. The length of the network per customer is 35 meters.
Caruna Oy’s electricity network is about 80,000 km long and extends from Hanko to Kuusamo. The network area is geographically challenging for electricity distribution, as there are extremely varying operating conditions in the area. The amount of network per customer is large.
Caruna Espoo's electricity network is 8,100 km long. In the network area, investments per customer are clearly lower than in Caruna Oy.
Caruna will adjust its operations due to the Energy Authority’s new regulatory model, that came into force in the beginning of the year. The regulatory model for 2024–2031 weakens Caruna’s investing capacity, and the company has commenced adjustment measures for planned investments. Investments will be lowered by approximately 60 million euros in 2024.
The prices of Finnish distribution companies are public knowledge
All the prices of Finnish distribution companies can be seen on the Energy Authority website. Company-specific prices are updated monthly and can be found on the tabs of the table.
Price differences between electricity distribution companies are due to the type of area in which the company operates and how many of the company’s customers participate in paying for the construction of the electricity network.
It is more expensive to construct the electricity network in lake areas or in the archipelago. On the other hand, the more customers share the costs, the lower the price paid by an individual customer. This is why city companies have cheaper transmission prices than companies in sparsely populated areas. There are 77 electricity distribution companies in Finland.
Average prices are displayed according to typical user. The typical user is a customer group that uses electricity in different ways, such as residents in apartment buildings or residents in electrically heated detached houses.
The price includes the average price according to the cheapest product for each customer group with the presented annual consumption. For example, for a user in an apartment building, (2,000 kWh) times the unit price of general distribution c/kWh + basic fee €/month times 12 + taxes, and finally, the annual cost obtained is divided by gross consumption, resulting in the average price (cents/kWh).
How can I impact my distribution invoice?
Through your own electricity consumption, you can impact both the variable network service fee (c/kWh) and the electricity tax (c/kWh). These account for about 50 per cent of the annual electricity distribution fee (network service fee) in an apartment building and about 75 per cent in an electrically heated detached house.
Electricity distribution prices in European comparison
At the end of 2022, average network service prices in the EU were highest in Lithuania and lowest in Malta. In Finland, the price for network service is also the lowest in EU countries in relation to the customer-specific amount of the network.
When comparing the price of Finnish network service, and considering the length of network per customer, Finland is among the cheapest countries in Europe, despite its challenging conditions. As a country with long connections and low population density, we have managed to build and develop our network very cost-effectively. The reliability of electricity distribution in Finland is also at an excellent price level when compared with other European countries.
Up-to-date price statistics for Finnish network companies can be found on the Energy Authority's website.
The clean energy transition requires investments in the electricity network
Due to the electrification of society, the need for electricity is expected to increase in the future. The annual use of electrical energy in Caruna's network areas will grow by approximately 50% by 2040. Momentary demand, i.e. power requirement, increases by more than 100%.
For the distribution network, the main change phenomena that increase capacity needs and increase electricity consumption are:
- electrification of heating (district heating and other centralised heating solutions, as well as individual decentralised heating solutions)
- electrification of transport (passenger car traffic, but also public and heavy transport)
- increase in clean electricity generation, in particular wind and solar power
- the growth of clean and affordable electricity-consuming industries and services (hydrogen economy, data centres, etc.)
- increase in the number of active customers participating in the energy market (e.g. price elasticity and energy reserves)
The above changes affect specifically production and consumption connections that are connected to or primarily connect to the distribution network and all require significant, long-term and benefit-focused development of the distribution network in order to be realised. If benefit-focused and systematic network development for long-term needs cannot be done, the networks will become a bottleneck for the above-mentioned development.
The Energy Authority's regulatory model for 2024–2031 significantly weakens the company's operational prerequisites and ability to invest in the network to meet future needs. Due to these factors, Caruna estimates that the development projects for the clean transition, the security of supply and the development projects of the electrified society will be delayed in Caruna's domains.
QA
Why do I pay for network improvements?
The war in Ukraine and the consequences of the war have also increased the costs of electricity distribution companies. For example, prices of loss of electricity have risen and are rising due to the current crisis in the electricity market. In 2022, the costs of loss of electricity have increased by 50 per cent and by 2023, the share of loss of electricity costs is expected to quadruple compared to 2022.
General inflation and the impact of the crisis on global raw material and component prices will increase the costs of developing and maintaining the network. In addition, market interest rates have risen, increasing capital costs. Taken together, these reasons increase the operating costs of electricity network companies.
How will Fingrid's announcement that it will not charge transmission grid fees affect prices for Caruna's customers?
Fingrid will not invoice network fees for January, February, or June 2024. The transmission grid fee paid to Fingrid represents about 10% of Caruna's costs. Transmission grid charges are "pass-through" items for distribution network companies, i.e. costs paid to the transmission system operator are always conveyed to the distribution price. The remaining 90 percent are other costs, such as investments, loss payments, operational costs, and financial costs.
I rarely use my summer cottage, why do I still have to pay a distribution fee?
The power grid must be operational at all times. Only 20 per cent of the costs for the electricity network depends on the distributed amount of energy. The majority, or 80%, is caused by the existence and maintenance of the network. This creates costs for the network company, even if electricity is not used. This is particularly true for summer cottages.