The transmission network High Voltage Network (Augstsprieguma tīkls, AST) and ST are among the largest electricity consumers in Latvia. Companies have to compensate for electricity losses in their networks – last year about 450 gigawatts or 6% of all Latvian consumption. This volume has become much more expensive due to the high electricity price, which is the main reason for operators to raise prices.
If the tariff project submitted by the ST is approved, the fixed cost to households for connection will rise approximately seven times, while the supply of each kilowatt-hour will be one cent cheaper. In some cases, the transmission and distribution share of the household electricity bill would double
In Lithuania and Estonia, the largest distribution operators raise tariffs more frequently and the next increase is scheduled for January 1.
Compared to the draft submitted by the ST, it appears that distribution services in Latvia would be the most expensive after the approval of the tariff, unless Lithuanian or Estonian operators decide to raise the tariffs even higher in the coming months.
Energy consultant and former SPRK Council member Gatis Ābele warned that, in particular, transmission tariffs could deter industrial investment: "We will have the highest tariff compared to Finland, the Baltic States, Poland, and Sweden. For producers and manufacturing companies, this will be a red flag."
Politicians and authorities have started looking for ways to slow down tariff rises. The evaluation of tariffs could take some time. The SPRK's Executive Director Jānis Miķelsons acknowledged that there is no doubt that the increase in the tariff is justified by the price of electricity. But the regulator can adjust the tariff downward if it finds some unwarranted spending in the calculation.
In the meantime, Economics Minister Ilze Indriksone (National Alliance) listed for a number of options for slowing down tariff increases. First, the price of electricity has fallen since the tariff was submitted. The tariff deadline may also be extended, which would level the high costs. The Minister also promises to advance a decision in the government to assess the possibility of writing off the accumulated losses of companies. This could potentially lead to the exclusion of several tens of millions of euros from the tariff calculation, but such a decision would significantly weaken the financial performance of both companies.
This would be particularly risky in the case of AST, since it has started to attract private investors to projects whose trust in the company could be lost: "This risk needs to be assessed, and that is why there may be a different situation for the AST and the ST and these risks have to be assessed. But it can certainly be stressed that it is the company's management that also has a lot of things to do. A very large increase is also envisaged in the AST remuneration section," Indriksone said.
Gunta Jēkabsone, chair of AST's board, said that the tariff increase could be reduced by falling electricity prices, but other things in the tariff could not be changed significantly: "We have approached the tariff with extreme care when submitting the draft. We're valued at every line, every cent. Consequently, I can say with great responsibility that the project submitted is fully in line with the current situation. "
Tariffs worry solar panel users
Another problem with tariff increases is higher costs for new electricity producers, such as solar-panel parks. For producers the increase in the new ST tariff will be the steepest, by 570%. On the other hand, if the manufacturer is able to connect straight to the high-voltage line, the costs will be significantly lower.
Gunārs Valdmanis, executive director of the Latvian Association of Electrical Engineers, said that for some ST-connected producers, the new tariffs can cost more than 10% of turnover: “This is a very significant impact and should be considered as a pretty significant threat to the attractiveness of projects, the economic rationale for projects. Consequently, I really want to point out that there is a very strong basis here, however, for both operators to try to coordinate their policies with regard to producers."
The new tariffs have also worried households that have installed solar panels. The experts pointed out that the costs of distributing the profitability of the panels are not directly affected. However, those who have increased their capacity to obtain more state aid have been disadvantaged. For example, a maximum of €4,000 aid for setting up panels can only be obtained with 32 amps. There is no need for such a powerful and expensive connection to the panels.
About 720 households have increased their connection capacity this year with the installation of panels, possibly due to state aid conditions. According to the consumption data, the ST concludes that two-thirds of their capacity could be reduced. But the solar-panel aid program doesn't allow it to do it for five years, otherwise, the aid will have to be repaid. The ST now demands that the condition be changed: "We have problems if a neighbor wants a new connection, but as if the power grid is occupied, but it is not used, and we have to connect a new line for the neighbor. So we are not really happy with the outcome; we are very prepared to go and talk, change [the conditions]," said Sandis Jansons, CEO of ST.
The Minister for Economics agreed that the capacity for the users of solar panels should be allowed to be reduced, and therefore the Ministry is currently preparing amendments to the aid program.