New Electricity Market Act changes the rules of the game

In the new Electricity Market Act that comes into force at the beginning of September, the transmission grid will partly be defined in a different way from before. The act contains more detailed requirements than before concerning improving the security of supply of the electricity networks and boosting the preparedness of electricity network licence holders. For Fingrid, this requires new kinds of preparedness and operating models.

According to a previous definition, the transmission grid has been a national, uniform and looped network consisting of connections of a rated voltage of at least 110 kV, in which alternative transmission routes exist between substations in case of failure. According to the new act, an individual, radial cable is also part of the transmission grid, if its voltage is sufficiently high and if it supplies a large centre of consumption in the distribution network.

Definition of the transmission grid presents new challenges

According to the new transmission grid definition, Fingrid is also responsible for building individual high-voltage cables, for example in large towns within existing transmission networks. For instance, an underground 400 kV supply cable is planned for Helsinki.

The amendment of the act will also affect questions of division of responsibility. According to normal regulations, transmission grid connections must be secured if the consequences of a fault do not remain local. This cannot be done with a single supply cable, but also requires the securing of this connection.

”The definitions now prescribed in the act will definitely cause Fingrid to re-assess and back up its functions. Our operations must be brought into line with the definitions of the act. Operational expansions will be covered by transmission grid tariff charges,” said President and CEO Jukka Ruusunen at a press conference today.

At the press conference, Ruusunen said, that according to the new Electricity Market Act, the grid must be planned, built and maintained better to withstand such things as disturbances caused by the weather.

”The new Electricity Market Act requires grid owners to improve the transmission capacity and security of supply of their networks. The act also includes the objective of keeping Finland a uniform price area for electricity, noted Ruusunen.

The company is in any case being tasked with new functions as, concerning guarantees of origin for electricity, the new act defines Fingrid’s role as a registrar of guarantees of origin for electricity from 1 July 2013. The guarantee of origin is proof that the electricity has been produced using renewable energy sources. The aim of this system is to increase the use of renewable sources of energy. Fingrid's function as registrar is to grant, transfer, cancel and invalidate guarantees of origin for electricity for the parties in electricity markets in an impartial and undiscriminating way.

What will change in the electricity market?

The Electricity Market Act defines the transmission grid such that individual, radial cables can be part of the grid if their voltage is sufficiently high and they supply large centres of consumption in the distribution network.
The act stipulates the separating of grid ownership. Fingrid Oyj has already acted in accordance with the requirements of the Electricity Market Directive; now these regulations are also being prescribed in law.
According to the new Electricity Market Act, the distribution network must be planned, built and maintained so that the failure of the network as a result of a storm or snow does not cause a power outage of more than 6 hours to customers in urban areas and more than 36 hours to those in other areas.
The act also stipulates the supply security requirements set for the transmission grid and high-voltage distribution networks. A general obligation of preparedness will also be set for grid owners in case of disturbances and emergencies.
The standard compensation payable to customers for power outages will be increased.
The act will promote access to electricity and natural gas networks and, for example, the opportunity to connect wind farms to the grid through common connection cables will be facilitated.
The package of legislation specifies regulations concerning the rights of consumers using electricity and natural gas. It will be made easier to change suppliers of electricity.
Consumers must be offered different payment methods to pay their electricity and natural gas bills.
The Energy Market Authority’s functions, powers and independence will be harmonised with the requirements of EU legislation.

Transmission grid tariffs amongst the lowest in Europe

For several years now, Fingrid has been communicating the need to increase grid charges. At the beginning of this year, the grid charges of industry and energy companies were raised by an average of 15%. At the beginning of 2014, transmission prices will be raised by an average of 8%. The change in electricity prices for the average consumer will not be significant. At present, the increase in the transmission charge caused by grid transmission in a middle-sized detached house heated directly by electricity is about €5 per year and, in a block of flats, about €0.50 per year, in comparison to the previous year.

”In addition to a significant investment programme, the market-based costs of grid operations are increasing. In spite of moderate increases, Figrid is endeavouring to keep tariffs competitive on a European scale. Our tariffs are amongst the lowest in Europe. We have succeeded in cost efficiency and it will continue to play a key role in the company’s operations,” said Ruusunen.

Fingrid's nation-wide transmission grid is an integral part of the power system in Finland. The grid is the main network for electricity transmission, to which the major power plants, industrial plants and regional distribution networks are connected. Fingrid makes sure that Finland obtains electricity without disturbance.

Fingrid is arranging a seminar for its stakeholders at the Helsinki Exhibition and Convention Centre today. The seminar deals with the future grid tariffs and contract structures as well as the progress of the company’s capital investment programme. The presentations given in the seminar can be viewed as a live webcasting on the Internet and afterwards as recordings.

Link to the material of the broadcast

Further information:
Jukka Ruusunen, President & CEO, tel. +358 (0)40 593 8428

Available by telephone on 2 Sep at 11 am, immediately after the press conference and then at 2.30 – 3.00 pm or at 4 pm.