Elenia cuts more than 40 million in next year’s network investments due to changes in the Energy Authority’s regulatory methods
Elenia´s contractor partners will lose construction projects
A reduction of more than EUR 40 million in Elenia's investments next year will reduce the work of the company's contracting partners. The reason for the sizeable investment cuts is the Energy Authority's changes to regulatory methods in the middle of a four-year regulatory period, which disrupts long-term investment planning.
"We have consistently renewed the aging electricity network for over a decade with well over EUR 1 billion to improve the quality of service for our customers. Equally consistently, we have told our contractors about the continuity of investments during this decade. Now the changes proposed by the Energy Authority in the middle of the regulatory period will disrupt our long-term work to renew the most important basic infrastructure enabling the green transition, the electricity network," says Tapani Liuhala, CEO of Elenia.
"Our partners lose work and, for example, domestic cable and equipment manufacturers lose orders. It is very unfortunate to have to cancel agreed work," Liuhala continues.
Changes by the Energy Authority cause unequal service quality to customers
The Energy Authority's changes to the regulatory methods based on the amended Electricity Market Act cause unequal service quality to customers. Previously, the main targets for security of supply had been set by 2028, now until 2036. It feels wrong that outside of the cities, power outages caused by storms and snow loads are affecting customers' daily lives for longer than previously promised,” says Liuhala.
"Since 2009, we have systematically refurnished the electricity network to be weatherproof and maintained stable and moderate tariff developments. It has been almost three years since our last tariff increase of around 6% and none of our tariffs changes have been bigger than this. Responsibility has guided our work," Liuhala says.
Previously, the requirements of the Electricity Market Act of 2013 were driving the improvement in the security of electricity supply and the resulting tariff development.
Elenia´s partner meeting
Elenia organised today a meeting for its network of contractors to discuss the reduced investment. Elenia is currently investigating which construction projects cannot be undertaken next year. The refurbishment of the aged electricity network has employed Elenia's extensive network of partners, involving a large number of SMEs.
"The Energy Authority's sudden change in regulatory methods also surprised our credit rating agency, which will have an impact on our investment funding. Together with our partners we are trying our best to find a solution on how we can move forward after the cuts," Liuhala says.
Climate targets suffer
Reduction in the network investments also affect climate targets for renewable energy. The energy transition and the low-carbon society require secure electricity networks, which are the basis for the development of a smart electricity network, as highlighted by the Smart Grid Working Group of the Ministry of Economic Affairs and Employment in 2018.
"Electrification of everyday life and the goals of achieving a carbon-neutral lifestyle require intelligence and flexibility from the electricity grid. Finland has been a forerunner in this. Now this development is slowing down at the same time as climate targets are getting more challenging," Liuhala says.
Wind power construction is growing, and approximately one fifth of Finland's wind power is in the Elenia´s network area. "Our job is to connect wind power to the renewable electricity system and market. Challenging situations are ahead when this development is affected by the investment cuts," Liuhala regrets.
The energy sector is waiting for the confirmation by the Energy Authority of changes in regulatory methods at the end of the year. Elenia has no decisions on the impact of the changes on pricing.
"Long-term investment planning has been based on predictable regulation. Now this continuity has been disrupted. Despite the fact that electricity distribution pricing in Finland has been at the European average despite harsh weather conditions and long distances," Liuhala says.
• The prices of the service of 77 electricity network companies in Finland are different, according to whether they provide service in urban or rural areas.
• In cities, the electricity network is part of the underground basic infrastructure, and customers are dense in terms of network length.
• Sparsely populated areas, such as the Elenia´s network area, have fewer customers along the long electricity network.
• Elenia has 75,500 kilometers of electricity network and 432,000 customers, i.e. approximately 175 meters of electricity network per customer. In cities, the corresponding figure is less than 20 meters per customer.