The Competition Authority has approved 83.00 euros per MWh as the new reference price of heat in Utilitas’ (energy group) Tallinn network area, which includes Tallinn and Maardu, and 72.34 euros per MWh in the Rapla network area, excluding VAT. The increase in reference heat prices was caused by an exceptionally sharp rise in natural gas prices.
The new reference prices for heat will take effect on 1 December, and invoices with the new prices will reach customers in January. Until then, the current reference price will apply. ‘At the beginning of the year, we submitted a price application to the Competition Authority, which would have led to lower reference price of heat in Tallinn. However, the situation has changed dramatically over the past year due to the increase in gas prices, and unfortunately, the reference price set forth at the end of October was, instead, significantly higher than before,’ said Robert Kitt, Head of Utilitas district heating companies.
During the warm autumn weather, Utilitas got all the heat it needed from renewable sources and household waste. However, as consumption increases in cold weather, natural gas must be used, the price of which has increased six times since the beginning of the year; the price has been particularly volatile in recent months.
Over the past 12 years, Utilitas has invested more than 400 million euros in switching to renewable fuels for heat production and reducing its dependence on imported fuels, which have extremely volatile prices. At least 2/3 of the heat consumed in all Utilitas networks is produced from wood chips and household waste. Fossil fuels are used for covering peak loads and it is the changes in fossil fuel prices which currently affect the reference price of heat. Wood chips and household waste reduce the effect of increasing gas prices on the price of heat; the price of heat may reach 150 euros per MWh elsewhere in Estonia in areas where natural gas is used exclusively. Utilitas will continue using the current reference prices in Haapsalu, Kärdla, Keila, Jõgeva, and Valga district heating areas.
It is important to continue investing in new sources of production to avoid future price shocks in the energy market. Significant investments are needed to reduce the share of imported fuels. Utilitas plans to build fossil-free production capacity to reduce the share of natural gas to less than 5 per cent of total annual production and to achieve carbon neutrality in its networks by 2030 at the latest. ‘Both producers and consumers have been hit hard by the current energy crisis and we hope that the price of natural gas will go down, but this year’s energy markets show once again that the transition should be made as soon as possible,’ said Robert Kitt, commenting on Utilitas’ intention to phase out natural gas. A well-thought-out and constructive cooperation between the private and public sectors is needed in order to deliver large-scale investment plans.
We applaud the Government of the Republic of Estonia for finding ways to compensate consumers for the additional costs arising from the increase in natural gas prices. If necessary, Utilitas is prepared to find temporary solutions in cooperation with apartment associations for postponing winter invoices to the summer period, when heat consumption is significantly lower.
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