How are electricity transmission prices determined?
Electricity transfer prices are a complex entity that is determined on the basis of several different factors. In this article, we examine how electricity transfer prices are formed and which factors affect their size.
Basis for determining electricity transmission prices
Electricity transfer prices are mainly determined based on the following factors:
- Costs of the network company: Electricity transmission prices cover the costs of the network company related to the construction, maintenance and development of the electricity network. These costs include, among other things, investments in new power lines, transformers and other infrastructure projects.
- Use and maintenance of the network: Use and maintenance of the electricity network require constant monitoring and maintenance. This includes, for example, repairing faults, checking lines and other maintenance measures.
- Supervision by the Energy Agency: In Finland, the Energy Agency monitors electricity transmission prices and ensures that they are reasonable and based on real costs. The Energy Agency also sets profit targets for network companies, which affect the level of transmission prices.
- Number of customers and consumption: Electricity transfer prices may vary by region depending on the number of customers and electricity consumption. In sparsely populated areas, transfer prices can be higher, because network maintenance and construction are more expensive in relation to the number of customers.
- Network losses: There are always some losses in the transmission of electricity, i.e. part of the electricity is lost on the way from the production plant to the consumer. These losses are taken into account in the transfer prices.
Structure of transfer prices
Electricity transmission prices usually consist of two main parts:
- Basic fee: This is a fixed monthly fee that is determined by the size and type of the customer’s subscription. The basic fee covers part of the network company’s fixed costs.
- Consumption charge: This is a variable charge based on the customer’s electricity consumption. The consumption fee covers the variable costs caused by the transmission of electricity, such as network losses and maintenance costs.
Effects on consumers
Electricity transfer prices directly affect consumers’ electricity bills. It is important to note that transfer prices are separate from the selling price of electricity, which is determined in the market. Consumers can bid on the selling price of electricity, but transmission prices are determined by the local network company and cannot be bid on.
Additional information on electricity transmission prices and their determination can be found on the Energy Agency’s website: Energiavirasto.
In summary, it can be stated that electricity transfer prices are determined on the basis of many different factors, and their size is affected by both the network company’s costs and the Energy Agency’s supervision. It is good for consumers to be aware of these factors in order to better understand the composition of their electricity bill.
