(THIS ARTICLE IS MACHINE TRANSLATED by Google from Norwegian)
The power market does not work in contradiction with high power prices, critics argued when today's energy law was first addressed in the nineties. The play from the Bergen Peninsula Municipal Power Company (BKK) earlier this week is the first clear sign that the power companies are not thriving with the power market which should give the population the best and lowest power price.
- The starting point is to prevent a recurrence of the high electricity prices we experienced last winter. We know that most Norwegians choose the most expensive alternative when it comes to electricity, namely standard variable power, said BKK's strategy director, Rikard Solheim, to TV 2 Nettavisen this week.
Most Norwegians buy the most expensive power and provide the opportunity to buy power in the market. But also for the companies, the accounts show that the free power market was not the gold mine many had hoped for.
The power giant BKK now proposes to remove free choice of power supplier. They claim that this will give people cheaper electricity bills. The cost of having an end-user market for electricity exceeds the gain, BKK believes.
No simple item
Power expert Kjell Rønningsbakk, editor of the news and analysis website KraftNytt.no believes that the solution Solheim outlines can be very good for many.
- Electricity is not an easy product to sell, says Kjell Rønningsbakk, and points out that BKK spent tens of millions of kroner on the marketing of Rainwater from Bergen.
- It was the BKK customers who ultimately had to pay for this powerful marketing of the rain in Bergen, says Rønningsbakk. Other similar examples are Swedish Birka, which spent 50 million Swedish kroner on marketing Hemel as a brand. It was the customers who had to pay for the investment over the electricity bill.
Kjell Rønningsbakk points out that after six years with the opportunity to change power supplier, 70 percent of customers have still not taken advantage of this. The most expensive power is so-called "standard variable power". While 70 per cent of Swedish electricity customers chose a fixed price for electricity, 70 per cent of Norwegian electricity customers chose to invest in a variable power price. The vast majority of Swedish electricity customers have thus not experienced the large price fluctuations that Norwegian customers struggle with.
- The vast majority of users in Norway will not notice if the power market disappears again, and of course will not miss the market either, says Rønningsbakk. He believes the competition that is claimed to exist between the suppliers in the market today is an illusion.
- The electricity suppliers act as an intermediary, and remove the end users from the power market, where the real price competition takes place. No one has calculated what the marketing of a couple of hundred suppliers costs. In addition, a comprehensive reporting system has been set up where the grid companies must read the customers' meters four times a year, and send the meter data to the power supplier for each individual customer. I would think that the cost of having a retail market for electricity exceeds the gain.
The feeling of saving
Kjell Rønningsbakk says people can be left with a feeling that they have saved money after changing power supplier.
- In reality, they are still one step above the price that is necessary, in that they trade through an intermediary. By linking consumers directly to the power market, it will be possible to create an incentive to adjust electricity consumption according to price fluctuations in the market.
He believes that people should instead be rewarded when they use electricity wisely.
- People should be given the opportunity to hold back on electricity consumption at those times of the day when prices are generally highest. It will save us a lot of network development if most people ran the washing machine and dishwasher at night. Such a solution requires the development of two-way communication in the power grid, where the meter data is sent hour by hour from the fuse box at each customer and to the power plant.
Rønningsbakk is nevertheless not entirely sure whether the proposal from BKK will provide customers with security against the large fluctuations in power prices. He points out that the average spot price in 2000 was 10,3 øre per. kilowatt hour in Norway. On 5 January this year, this price was 84 øre. That is over 800 percent price increase.
- Had the petrol price risen as much, Carl I. Hagen would not have had a voice again, says Kjell Rønningsbakk.
There are no other commodity markets that have a price fluctuation that is close to that we find in the power market. The reason is a hydropower system where precipitation normally fluctuates up to 25 percent from one year to the next. While consumption is largely stable. Last winter, consumption fell by four per cent due to the sharp increases in electricity prices.
- In theory, consumption should fluctuate with prices, but for those who live in the half a million homes in Norway where electricity is the only source of heating, there are no alternatives. They have to pay what the power costs anyway – or freeze. It is an unworthy issue in a society that would like to see itself as a welfare society, says Kjell Rønningsbakk.
The previous dry year in 1996 cost NOK 3,3 billion. Norwegian households and small businesses paid 1,2 billion of this. The remaining 2,1 billion was shielded by consumers, because the energy plants paid for it from their own coffers. Norwegian consumers used 73 billion kilowatt hours in 1996. On average, they paid 29,6 øre per kilowatt hour. This was an increase of 2,2 øre from the previous year, while the power plants paid the remaining 3,4 øre the dry year price in 1996 of 33,0 øre per kilowatt hour. Last winter, the energy plants forwarded the bill for the high spot prices to their customers.
- To be able to shop where it is cheapest at all times, you must always know all the prices. It is hardly possible for an ordinary consumer, even if the Norwegian Competition Authority publishes an overview every Monday. Most have limited time. It is not possible in practice to follow all the markets where we trade goods and services. If, for example, I want to buy the cheapest coffee, I have to know all the sales prices for coffee in Oslo. It is not possible in practice. The same applies after all, also in the power market, says the power expert.
The Storting takes up the matter
The critics of the energy law that was passed in 1990 are now right in some of the criticisms that were directed at a power market. Among other things, it was claimed that the market could not function. SV has earlier this year come up with a proposal to revise parts of the Energy Act. Among other things, the party wants to shed more light on how the import and export of power works and how the price mechanisms work. They also want a closer analysis of how confident Norwegians can be that they get electricity when they need it, the so-called security of supply.
Deputy chair of the Storting's energy and environment committee, Hallgeir Langeland, hopes that a majority in the Storting will do something for consumers. Such a majority can be built up around SV, the Center Party and the Labor Party.
- Before 1991, electricity was a right people in Norway had, today the market has become a quagmire for many who struggle with fluctuating electricity prices, says Hallgeir Langeland.
He wants a more detailed account from Minister of Energy Einar Steensnæs about the finances of the power companies.
- I would like to see where all the money has gone in this system. The price has increased extremely much, at the same time as the companies say that it does not pay off with this market. If the government itself does not take the initiative to shed light on this, then the Storting must do it for them, says Hallgeir Langeland.
