As stated in our earlier post, electricity is an everyday necessity. In the second part of this blog series, we will take a closer look at the different types of electricity contract options available and which one is the best choice for you.
What kind of electricity contract should I choose?
Different types of electricity contracts vary in terms of pricing and duration. When choosing an electricity contract, in addition to considering the price, your estimated electricity consumption, and type of housing, it’s also good to think about factors such as the origin of the electricity, as well as the quality and accessibility of customer service.
Spot-priced, valid until further notice
A spot electricity contract is an agreement where the price is determined by the Finnish price area of the Nordic Nord Pool electricity market. A margin, as per the contract, and a monthly fee are added to the spot price. The contract is valid until further notice, meaning you have the right to terminate it with a two-week notice period.
A spot electricity contract can bring you significant savings if you’re able to use electricity at home when the hourly price is low. Here’s how the costs are accumulated:
What you pay = (Hourly Nordpool Spot Price + Margin + Value Added Tax ) x Consumed Electricity + Monthly fee
Fixed Price, valid until further notice
In this type of contract, a fixed energy price and a monthly fee are agreed upon in advance, both of which remain valid until further notice. The seller must notify customers of any price changes at least one month before the changes take effect. Since the contract is valid until further notice, you have the right to terminate it with a two-week notice period.
An open-ended contract like this is suitable for you if you want a fixed contract price but don’t want to commit to a fixed-term agreement. However, this is not a very popular contract type, because if the energy costs rise, the fixed energy price can rise within one month. Usually the cost of electricity is also more expensive than in a spot-priced contract, because the energy companies have to calculate a premium to secure their business against losses. Älyenergia does not currently offer this type of contract.
What you pay = (Fixed Price (calculated by the seller) + Value Added Tax ) x Consumed Electricity + Monthly fee
Fixed Price, fixed term
In a fixed-term contract, the energy price and monthly fee are agreed upon in advance for the entire contract period. The fixed-term is binding to both the customer (you) and the seller (us / the electricity provider). As a customer, you cannot terminate the contract or switch electricity providers during the contract period, and the electricity seller cannot change the price or terms of your contract while the fixed term is in effect.
If the contract is terminated before the end of the agreed period, it constitutes a breach of contract, and early termination will result in a penalty fee. Despite the penalty, you retain the right to terminate a fixed-term contract, but you should be prepared to pay the termination fee. For fixed-term contracts longer than two years, you have the right to terminate the electricity contract after two years.
In the case of moving, the contract is terminated without charge.
Extending a fixed-term contract with a new one is not allowed without your consent. Instead, the contract continues as an open-ended agreement with terms provided by your electricity seller before the fixed term expires. You can choose to renew the agreement with a new fixed-term contract or switch to another product.
With this contract type, you don’t need to worry about renegotiating your electricity agreement during the contract period, making it a good option if you want to avoid price fluctuations in the market. This type of contract is often used as a way to protect yourself against higher prices and spikes in hourly energy cost during the winter months. However, if you can optimize your electricity consumption, a spot-priced contract can be quite a bit cheaper.
What you pay = (Fixed Price (calculated by the seller) + Value Added Tax ) x Consumed Electricity + Monthly fee
Price of Electricity
The price of energy is usually displayed in the format of cents per kilowatt-hour, i.e., x.xx cents/kWh or c/kWh. This refers to how many cents electricity costs per kilowatt-hour. The total energy price on your bill is directly dependent on how much electricity you have used during the billing period.
In addition to the energy charge, the contract includes a monthly fee, which is a fixed monthly payment that electricity providers use to cover fixed costs, such as staffing or billing-related expenses. The basic fee remains the same regardless of how much electricity you consume.
Electricity sales prices are the only part of your electricity bill that you can compare and shop around for. The sales price is influenced by factors such as the prices in the Nordic electricity market and energy production costs.
In homes with low consumption, it’s worth paying attention to the basic fee, as it forms a relatively large portion of the monthly electricity bill when usage is minimal. Vice versa, in households with larger consumption, the cost from electricity consumption itself plays a much more significant part of total expenses.
Electricity Production Methods
In some electricity contracts, the electricity is always produced using a single method, such as wind power. In Vihreä Älyenergia’s (VÄE) contracts, the production method is “carbon-free,” which means that no fossil fuels are used in electricity production and there are no carbon dioxide emissions. VÄE’s energy is always generated from wind and nuclear power, resulting in a minimal amount of carbon dioxide emissions through the entire production-to-consumer process. The production methods used by VÄE ensure that the amount of electricity you consume is produced according to the specified production method mix.
Certified Guarantee of Origin
An electricity origin certificate is a certification that verifies the electricity was produced from a renewable energy source or nuclear power. Guarantees are purchased in the amount equivalent to the electricity sold to customers using that production method. This makes it possible to buy, for example, solely wind power, even when the wind isn’t always blowing. The origin of electricity must always be verified if the electricity seller markets or sells nuclear power or renewable energy. In Finland, the electricity origin guarantee registry is managed by Finextra Oy, owned by Fingrid. The Energy Authority oversees the registry and ensures compliance with the law in its role as a regulatory body.
What is the Datahub?
The Datahub is a statutory centralized data exchange system for all parties in Finland’s electricity market, launched on February 21, 2022. As mandated by the Electricity Market Act, Datahub stores information on all electricity customers and contracts nationwide. It is managed by Fingrid Datahub Oy, a subsidiary of the national grid operator Fingrid.
Before Datahub, customer and consumption data for electricity usage points were decentralized across different electricity companies’ systems, and the exchange of information between them was relatively slow. However, the electricity market required real-time, secure, and more efficient data exchange, leading to the adoption of the centralized system. With the launch of Datahub, all electricity consumption and customer data from across Finland are stored in one centralized location.
Datahub stores critical information about electricity usage points, such as customer and consumption data, as required by the Electricity Market Act. The system speeds up data exchange between various stakeholders by ensuring that the information is accurate, up-to-date, and equally accessible to all entitled market participants. However, data is only shared between parties that have the legal right to access it.
The system standardizes customer, contract, and metering information used by the industry, as well as processes and timelines for key customer events. For example, when you move or change your electricity supplier, all the relevant information is centralized in one place, which speeds up the validation of electricity contracts.
What is the GSRN identifier?
With the implementation of Datahub, new type of usage location identifiers were introduced. The GSRN identifier replaced the old usage location codes as of February 21, 2022. During the change, each electricity usage location in Finland was assigned a unique 18-character GSRN (Global Service Relation Number). The GSRN identifier consists of three parts: a company identifier, a unique identifier, and a check digit. This code uniquely identifies your electricity usage location.
What is the Nord Pool?
Nord Pool is a power exchange that has been operating in several European countries since the 1990s. The exchange is owned by the transmission system operators / electricity grid service providers of the Nordic and Baltic countries. Finland joined Nord Pool in 1998. The purpose of the exchange is to balance demand peaks across different regions and to increase competition.
The electricity production methods in the Nordic countries complement each other, and these shared electricity markets enable the sale and purchase of electricity across borders. For example, Finland’s surplus electricity can be sold to Sweden, and in turn, Finland can purchase surplus electricity from Norway when needed.
The Nord Pool spot price is therefore based on the supply and demand of electricity in these common markets. In Finland, the price of exchange electricity is determined by Nord Pool’s spot prices.