Frequently asked questions about electricity distribution pricing

How is the price formed? Why can't electricity distribution be put out to tender? On this page, we collected questions and answers about electricity distribution pricing.

Why can't electricity distribution be put out to tender?

Electricity is always distributed by a local network company, which owns the electricity network and invoices for its use. Residents living in a particular area cannot choose their electricity distributor themselves, but it is determined by the location of the home, cottage or other property.

The distribution company monitors the functionality of electricity distribution 24/7, is responsible for network security, maintenance and fault repairs, and builds the network to be weatherproof and strong enough for the needs of growing electricity consumption. The above tasks are statutory and require large amounts of capital and strong industry expertise from companies in the sector.

Tendering electricity distribution would require parallel electricity networks, in which case there would be electric cables from two or more operators on the property. It is not reasonable or cost-effective for several companies to construct parallel electricity networks. This is why electricity distribution is regulated. Regulation is required to ensure that electricity distribution prices remain reasonable and the electricity distribution business remains efficient.

Electricity distribution is a so-called natural monopoly, the operators of which are regulated by the Energy Authority under the Ministry of Economic Affairs and Employment.

Finnish electricity invoice in EU comparison – expensive or cheap?

At the end of 2022, the EU's highest average network service prices were in Lithuania and the lowest in Malta. Finland's price level is clearly lower than the EU average, and Finland is among the cheapest countries.

When comparing the price of Finnish network service, taking into consideration the length of network per customer, Finland is among the cheapest countries in Europe, despite the 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 level relative to price when compared with other European countries.

Up-to-date price statistics for Finnish network companies can be found on the Energy Authority's website

How are electricity distribution companies regulated and how do they operate?

In Finland, there are a total of 77 distribution network companies responsible for electricity distribution to customers.

The operations of electricity distribution companies are regulated by the Electricity Market Act and the Act on Electricity and Gas Market Regulation. The regulator is the Energy Authority operating under the Ministry of Economic Affairs and Employment, whose main tool is the regulation model.

How are Caruna's operations financed?

Caruna's external borrowing is at its maximum, with a total debt of 2.5 billion euros. The rest of the operations are financed by owners' investment. The relationship can be compared, for example, to a mortgage, where part of the financing comes from yourself, part from a financial institution.

Efforts have been made to organise our financing as cost-effectively as possible. The aim of financing is to guarantee long-term conditions for operations and ensure the implementation of network improvement investments. The average interest rate on external loans at the end of 2022 was 2.1%.

The owners have invested approximately EUR 800 million in Caruna as a shareholder loan. A shareholder loan of this size is a precondition for obtaining the rest of the necessary financing as efficiently as possible from the market. Annual interest is paid on the shareholder loan.

Does Caruna pay any taxes in Finland?

Caruna pays all taxes in Finland. Caruna paid EUR 6.3 million in corporate taxes in 2022 (EUR 10.7 million in 2021 and EUR 10.7 million in 2020).

Electricity distribution companies also collect and pay to the state the electricity and value added taxes that customers pay in their electricity distribution invoices. Taxes account for about a third of the customer's total electricity invoice and about half of the distribution invoice. In 2022, Caruna paid to the state EUR 289 million of electricity and value added taxes collected from customers.

Read more about our tax footprint in our annual report.

Read more about the regulation model on the website of the Energy Authority

Electricity distribution terminology

Network service

We work every day for the smooth daily life of our customers. Occasionally, strong winds and thunderstorms cause interruptions in electricity distribution. We monitor the functionality of electricity distribution 24/7. We repair faults as quickly as possible, without compromising safety. We take care of electrical energy metering and the delivery of data to the market. We serve our customers through several different contact channels.

Investments to improve the electricity network

The length of our electricity network is 88,000 km. Investments are guided by the renovation of the ageing network, the clean transition, as well as new planning areas and other connections. Investment volumes have levelled off from the peak years, but they account for a significant share of costs now and in the future.

More information about Caruna's work sites
Purchase of electricity

Caruna has several connection points to the transmission grid (Fingrid), other high-voltage distribution networks or power plants. These are used to purchase the electricity needed for further distribution or transmission in Caruna's network when it is not produced in Caruna's network. 

In Finland, transmission grid charges are invoiced as part of the electricity distribution fee, accounting for about 2.5 per cent of the total energy charge. It is about 15% of the electricity distribution fee.

Loss of electricity

Electricity distribution also causes losses, i.e. a small part of this purchased electricity is lost on the way due to resistance (a property of conductors that resists the flow of electric current). In the electricity system, consumption and production must be equal at all times. Because of this, the amount of loss of electricity is purchased from the market.