The fixed price agreements that disappeared – VG

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According to Hans-Erik Ramsdal, general manager of NorgesEnergi, fixed prices have cost the power companies dearly.

– Many who offered fixed price agreements lost a lot, you suffered a lot as a supplier, he says to VG about last year’s galloping electricity prices.

NorgesEnergi itself has not had a fixed price. And now hardly anyone offers this.

– The market is vacuumed for fixed price agreements, says senior adviser Thomas Iversen at the Consumer Council.

During the past year, the Consumer Council has had around 150 different fixed price agreements strömpris.no. Not all have been available at the same time, but now there are only three left in southern Norway. They offer fixed prices of 361 and 275 øre kWh.

– Usually five to six percent of customers have chosen a fixed price, but now almost all the agreements have disappeared, says Iversen to VG.

– We understand that it is difficult to offer fixed price agreements today. With the uncertainty that exists in the market, it does not surprise me that the companies are sitting on the fence, he adds.

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The government will do one tax change which will give the power industry the opportunity to offer cheaper fixed prices for electricity to businesses and households than today. The aim is for this to be introduced 1st of January.

The government has also started the study of standardized and transparent agreements, including fixed price agreements, for the end-user market.

– The bill which is now out for consultation makes it easier to offer fixed price agreements since it removes the fiscal risk that power companies experience with the current system, says Finance Minister Trygve Slagsvold Vedum to VG.

– Today, they have to pay tax as if they sold the power at the spot price, so-called ground rent tax. That is why the power companies put in a large safety margin. We are changing the system to create security for people and bring the price of the fixed price agreements down, says Vedum.

In this way, says the finance minister, private customers and business customers will get a system similar to the power-intensive industry has today.

– Will this be in place on 1 January?

– For Sp and Ap that is the goal, but this is a change in the law that must be adopted by the Storting.

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– Very positive

Vedum believes that the tax change will help to reduce the price of fixed price agreements and points out that the head of Hafslund, Norway’s second largest power producer, in April implied that this could result in fixed price agreements of 50 øre kwh

– I was referring to long-term contracts with power-intensive industry which in April were around 50 øre. Today, I assume that they have unfortunately risen by 15-20 per cent, says managing director Finn Bjørn Ruyter to VG on Friday.

Such contracts are currently for a minimum of seven years.

– We are very positive about the government’s proposal. If we can pay tax on income and not on the spot price, it means that we can give such conditions to other than power-intensive industry, says Ruyter, who hopes that smaller companies and ordinary households can also enter into such agreements.

Ustekveikja is one of many electricity companies that have dropped fixed price agreements. It was the hook on the door for them in mid-June.

– Due to the situation in the market, it is too much of a risk to offer a fixed price to customers in price areas NO1, NO2 and NO5 (Southern Norway red.anm.). The vast majority of electricity suppliers who have entered into binding agreements with customers within fixed price and ceiling products have large losses due to high electricity prices and the huge fluctuations in the market, writes managing director Jan Olav Trillhus in an e-mail to VG.

He believes very few suppliers are willing to take the risk.

DKK 10 kWh?

– Extremely high electricity prices must be expected at least until the winter of 2023 – perhaps individual hours will exceed NOK 10/kWh. Very few electricity suppliers are willing to take this risk and it is extremely difficult to secure the expected consumption volume in the situation the market is in now, says Trillhus.

Energi Norge, which organizes the companies that create, transport and deliver renewable energy, does not have an overview of how many have stopped using fixed prices.

– No, but we are familiar with the problem, writes Toini Løvseth, director of market, electrification and customers, in an email to VG.

– It would have been a great advantage now if those consumers who do not want or cannot live with large fluctuations in the price of electricity had a fixed price, in the same way as in other European countries. However, in order for electricity suppliers to safely offer fixed price agreements, they must be able to secure the price of their own purchases, either in the financial market or in the commodity market, Løvseth states and points out that those options were too poor.

– Then the offer of fixed-price agreements stops.

She points out that the ground rent tax is an obstacle to increasing the supply of fixed price agreements.

– We and the authorities want to remove this obstacle, writes Løvseth.

– Unchallenging market situation

Norway’s largest electricity supplier, Fjordkraft, put fixed price agreements in southern Norway on hold from early March.

– It was mainly because of the challenging market situation. There are still large price fluctuations in the market due to resource situation and uncertainty related to Russia’s invasion of Ukraine, communications advisor Frode Fjellstad writes in an SMS.

– For private customers, we cannot recommend committing to such prices as we see now, but we make ongoing assessments of this, he adds.

Kristian Myrseth, PR manager at Fortum, says they have not sold fixed price agreements in the last decade because there has been no demand for such agreements.

– Historically, these have been more expensive agreements for customers than spot. As the situation is right now, we do not see it as possible to offer fixed price agreements that are attractive enough for customers, says Myrseth to VG.

In April, Hafslund Strøm became part of Fortum, which is one of Norway’s largest electricity suppliers, and also owns NorgesEnergi.

– Previously, it was possible to give a fixed price that was closer to the spot price, says Myrseth and points out that today’s volatile market makes such agreements too risky for the electricity company.

– Therefore, the consultation proposal that is now out is positive and we will contribute with our input. We listen to the customers and will offer what the customers want if it can be done, says Myrseth.

E24 wrote last year that former Hafslund Hafslund Strøm increased the ceiling on its maximum price guarantee from 99 øre kilowatt hour to NOK 1.56 after an “extreme situation”. The Consumer Council then stated that “price insurance is worth nothing if the ceiling can be lifted when prices rise.”

Fortum does not have a fixed price but a product they call “Freeze”, which is a spot price agreement where the customer is offered four times a year to freeze the price for two months. Right now this is not available.

Ramsdal in NorgesEnergi points out that a small number of Norwegians have traditionally had fixed price agreements, while 70-80 per cent of Swedish and Finnish consumers have fixed the electricity price. NorgesEnergi, like Fortum, offers “Freeze”.

The electricity subsidy, which means that the state covers 80 per cent of everything above 70 øre per kWh and 90 per cent from October until the end of the year, will dampen the winter’s electricity shock. As of today, the state will cover 80 percent the first three months of next year.

– You can roughly budget with one krone per kWh and then network rent and fees come in so that we are talking about plus or minus NOK 1.70 per kWh, says Ramsdal.

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