The Seimas approves liberalisation of the electricity market, presenting new opportunities for electricity consumers

Date

2020 05 08

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The Seimas unanimously approved the amendments to the Law on Electricity prepared by the Ministry of Energy – the regulation of retail electricity prices for household consumers will be abandoned in stages by 2023. This means that there will be a transition from a regulated retail electricity market to one that is based on competition.

According to Minister of Energy Žigimantas Vaičiūnas, this is a long-awaited change that many European Union countries have already implemented. Electricity consumers will have to decide for themselves and choose the electricity supplier that best suits their needs.

“Until now, the power supply market has been monopolistic, with minimal conditions for competition. Now, conditions for consumer-friendly competition are being created. As more electricity suppliers enter the power supply market, consumers will be offered better quality services and new opportunities. With the development of the electricity market, monopolistic supply is already becoming an obstacle to the emergence of consumer-oriented services, so the time to take this important step is now,” says Minister of Energy Žygimantas Vaičiūnas.

At present, almost all household consumers purchase electricity using the services of a public supplier (Ignitis), and the price of electricity is set by the National Energy Regulatory Council (NERC) no more frequently than every six months.

The transition from regulated to competitive electricity supply will be implemented in stages. A few years ago, the regulation of retail electricity prices for non-household (business) consumers was abandoned in the same way – in stages.

“These are major changes that will affect all electricity consumers, so in order for the transition to be successful and smooth, we will implement it in stages, starting with those who consume the most electricity and ending with the people who consume the least,” says the Minister of Energy.

During the first stage – starting 1 January 2021 – regulation of the final electricity price will be abandoned for the consumers who use the most electricity, i.e. for those who consume more than 5,000 kWh per year, except for vulnerable consumers and garden, garage, block of flats, dormitory and other administrators/associations purchasing electricity for the common needs of association members. There are approximately 90,000 such consumers in Lithuania, which accounts for 5 per cent.

During the second stage – starting 1 January 2022 – regulation of the final electricity price will be abandoned for all household consumers with an annual electricity consumption of more than 1,000 kWh, except for vulnerable consumers and garden, garage, block of flats, dormitory and other administrators/associations purchasing electricity for the common needs of association members. There are approximately 720,000 such consumers, which accounts for 43 per cent.

During the third stage – starting 1 January 2023 – final electricity prices will also be deregulated for those consumers who consume less than 1,000 kWh per year. There are approximately 870,000 such consumers, which accounts for 52 per cent.

In order to protect vulnerable customers, the public supply of electricity to them will end in the last stage, regardless of the amount of electricity consumed. It is important to note that regardless of the stages proposed, consumers will also be able to choose an independent supplier at their own discretion at an earlier date. In addition, it has been established that more favourable guaranteed supply pricing will be applicable to vulnerable consumers in cases where they do not choose an independent electricity supplier.

These changes mean that the purchase and supply price of electricity, which accounts for approximately 48 per cent of the final electricity price, will no longer be regulated. The other part of the price – electricity transmission, distribution and public service obligation services – will continue to be regulated.

Legal preconditions have also been created for the development of a basic data collection and exchange platform (a so-called “data hub”), which will make it possible to ensure further and even more efficient market development.

Along with the abandonment of electricity price regulation for household customers, smart meters will also be introduced. Smart electricity metering systems, smart grids and a common platform for data collection and exchange will, in the long run, make it much easier for residents to monitor and assess their electricity consumption needs and choose the most appropriate electricity supplier offer.

Liberalisation of the electricity market is one of Lithuania’s EU commitments. Most countries in the EU and the region in which Lithuania also participates in the electricity market have already liberalised the electricity market for household consumers. Estonia fulfilled these commitments in 2013, and Latvia followed in 2015.