Although electricity is a crucial part of our daily lives, its principles and technical aspects can be challenging for many of us to understand. In this two-part blog series, we aim to clarify the basic concepts of electricity and help you better understand how electricity works and what makes up the cost of electricity.
Electricity Consumption
Electricity consumption is measured in kilowatts per hour – kWh. It’s useful to know at least the annual consumption estimate for your own home – as in how much electricity your apartment or house and all the appliances and devices you use in your home, consume in one year.
Kilowatt-hour (or Kilowatts per hour)
A kilowatt-hour (kWh) is a unit of energy. An electrical device that requires one kilowatt of power consumes one kilowatt-hour of energy in one hour. For example, a 40-watt light bulb uses 0.04 kWh per hour (40/1000).
Annual Consumption (or Yearly Consumption)
The annual electricity consumption refers to the amount of electricity used by your home over a year.
In apartment buildings, electricity consumption is generally quite low. A typical one-room apartment consumes about 1000-2500 kWh per year. A two-room apartment for two people typically consumes 2000-3000 kWh annually, while a three-room apartment usually has an annual consumption of around 2500-3500 kWh.
For row houses, electricity consumption varies significantly depending on the heating system. If the house is heated with district heating, the electricity consumption does not differ much from that of an apartment. However, if the house is heated with electricity, the consumption will be significantly higher.
In a two-person row house heated with district heating, the average electricity consumption is around 2500-3500 kWh per year. In contrast, a row house heated with electricity may consume between 10,000 kWh and 12,000 kWh annually, depending on the age and structure of the building, and whether the home is partially heated with a fireplace, for example.
Electricity consumption in single-family homes varies greatly depending on the heating method. While lifestyle also affects consumption, electric heating can lead to significantly higher consumption, especially in winter.
A four-person family living in a single-family home with district heating typically consumes about 5,000 kWh per year. Conversely, an electrically heated single-family home may have an annual electricity consumption of up to 20,000 kWh.
Annual electricity consumption greatly influences which electricity contract is most suitable. For low consumption, particular attention should be paid to the basic fee of the contract, while for higher consumption, it is important to monitor the price of electricity more closely.
What affects my electricity bill? Why do I get two separate bills?
The price you pay for electricity consists of three main components: the cost of consumed electricity (electric energy), the cost of electricity distribution (a transfer fee), and taxes. Typically, you will receive two bills: one from your chosen electricity supplier (such as Vihreä Älyenergia) for the electricity you have consumed and another from your local grid company for electricity distribution. Below there’s additional information of each three components.
Electricity Consumption and the Electricity Supplier (Bill nr. 1)
In Finland, as a consumer, you have the freedom to choose your electricity supplier. The supplier is not bound by your location, meaning suppliers can sell electricity throughout Finland. In other words, the electricity supplier is the company from which you purchase your electricity, such as Vihreä Älyenergia. Electricity supplier and the type of electricity contract is the only component of your electricity costs that you can compare and choose between different providers. Although the providers all supply you with electricity, there are many differences in how the supplied electricity is generated and how environmentally friendly the production methods are. Here you can read about Vihreä Älyenergia and which production methods we use to ensure greener energy.
Electricity Transfer and the Electric Grid Provider (Bill nr. 2)
The electric grid service provider (or transmission company) is responsible for the local electricity grid and its maintenance. The electricity you use is transmitted to your home through the local electricity network, for which you are billed separately based on your consumption. For this part of your electricity costs you can’t choose the provider for, unless you wish to relocate to the area of your favorite grid provider.
If you don’t know the electricity grid service provider of the area you live in, you can use this map to find out which company it is.
Taxes (Included in both Bills)
Electricity tax is a tax paid directly to the state, collected by your local electricity grid service provider (transmission company). The tax is based on consumption and is listed as a separate line item on your transmission bill. There are two tax categories, but all individual customers and most business customers fall under category 1. The grid sevice provider remits the tax to the state. The size of the tax is determined by the parliament.
Value-added tax (VAT), 25,5%, is charged on electricity consumption (1), electricity grid services (2), and the electricity tax (1/2).