FAQ business

1. Who are electricity market participants?

–          National energy and price control commission (regulating body)

–          Power Exchange – Nord Pool Spot (NPS) Oslo

–          Distribution System Operator  (DSO)

–          Independent electricity suppliers (IES)

–          Transmission System Operator TSO (LITGRID)

–          End consumers (business and households)

 

2.  Why choosing independent electricity supplier makes sense?

Independent electricity suppliers started in Lithuania back in 2010, as soon as the largest business lost opportunity to purchase electricity from public supplier for regulated prices. Experience that business consumers cut electricity expenses by switching from public supplier to IES.

Regulated price from public supplier for business consumers is set 5,031 EUR ct/kWh before taxes. In most of cases IES pricing is more favorable and flexible. In addition IES may offer extra services.

 

3.  Questions that worth asking when you choose IES:

  • When was the license/permission issued? It can be true that company was established years ago; however it has just received the license for electricity supply. Make sure this is sufficient experience and satisfy you.
  • Has the license ever been stopped? Were any sanctions ever used against supplier from regulatory body VKEKK?
  • Who are currently IES customers? May be you will find companies that you know and you may ask for references and comments if they are satisfied?
  • How many people work in the company and serve consumers? Usually it is unlikely that company with 3-4 employers will fully satisfy increasing number of customers. Will this satisfy you in the future when you sign contract.
  • Who are the shareholders of the IES? Usually international capital may mean stability at the same time public companies (owned by government) may lag flexibility.
  • What are other businesses/areas that IES is active in? If electricity supply is not the main operations area, will you be fully served when the contract is signed?

How IES buys electricity that later is supplied to end consumers? Does IES have valid contract with local generator or importer? In case answer is „No“ it may means IES will buy all electricity in NPS for spot price. What happens when SPOT price is higher than IES gets form its customers?

 

4.  Why ESO is not trying to retain its customers? Don`t they need profit?

Lithuania is liberalizing its electricity and gas markets according to EU III energy package directives. All obstacles are removed for customers to choose freely among electricity suppliers.

 

5.  How IES submit their proposals?

Best results in business are always achieved when both parties are keen to agree upon bets mutual cooperation terms.   IES constantly searches and attracts new consumers. At the same time consumers become increasingly active in search for information. So new tradition of mutual trust and long term cooperation is becoming a norm. Normally you should expect IES offer shall include at least:

Price, price validity term (from …to), contract validity term (from …to), extra fees (if any), payment terms, responsible contact person, contract termination terms, other legally requires information, including but not limited to consumers obligations Distribution System Operator.

Remember – the more information you will collect the more accurate and precise comparisons of different offers you will have. And this defines how easy your choice will be prior of signing contract.

 

6.  Contract with IES, what is worth knowing?

Contract of electricity supply must not contradict to Lithuanian Law; usually such contract includes rights and obligations of each contract party, foreseen in Energy Law of Lithuania and Rules of Electricity supply and use of Lithuania. Contracts may also include other mutually agreed terms that will not contradict to Law of Lithuania. Contract must protect both consumers and suppliers interests equally. Recommendation to pay special attention to:

Price, payment terms, contract validity term, electricity supply term, contract termination / early termination / prolongation terms, agreed schedule and rules of future consumption planning.

 

7.  Lithuanian laws, legal acts and useful links that may concern:

Rules of electricity supply and consumption (http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=461609)

National law of electricity power (http://www3.lrs.lt/pls/inter3/oldsearch.preps2?Condition1=244185&Condition2=)

Nord pool spot (NPS) (http://www.nordpoolspot.com/)

ESO (Distribution System Operator DSO) (http://www.eso.lt/en/about-us.html)

LITGRID (Transmission System Operator TSO) (http://www.litgrid.eu/index.php?lang=2)

ENMIN (Minister of energy) (http://www.enmin.lt/en/)

 

8.  Is switching to or choosing another IES is easy?

Majority of companies who ever went through this will tell you YES, everyone can do this in Lithuania. All barriers that used to protect monopoly are removed. Consumers right to choose freely is protected by law, as any other consumer rights in any other area, be it for example mobile communications or hotel or any other supplier.  After all, no one can limit your choice where you by your gasoline, which internet supplier you select. Choosing electricity supplier is the same free and should not be limited.

 

Switching from public supplier to IES or choosing another IES does not cost anything.

Electricity supply/distribution is not interrupted to consumer who decided to switch.

 

9.  How consumer pays for electricity after he switches?

After the switch, consumer will receive 2 invoices. One will be issued by ESO for distribution services; another will be issued by IES.

 

10.  Are there any changes in meters reading process after switch?

All stay the same, all you need is to continue submitting meters reading to ESO as you did prior to switch.

No extra efforts form you is needed. ESO will take care and submit you meter readings to your selected IES, so invoices form ESO and your selected IES will include same kWh quantities for each respective period.

 

12.  What is VIAP tax?

VIAP tax is paid by each electricity consumer in Lithuania. Raised budget is used to finance services of public interests. Regulatory body sets amount of the tax annually. Budget is used to subsidize RES generation, AB Lietuvos Energijos gamyba generation, strategic projects such as links to Sweden and other. VIAP tax is included into ESO prices.

 

13.  What effects electricity (production/import) price?

 

Nord pool spot (NPS) Exchange is the only place where trading of electricity happens.

The only exaction is for power produced and used in Lithuanian territory, in such case electricity may be traded directly between generator and trader.

 

Absolute majority of IES, buy electricity on NSP for Spot price. Also IES may agree and buy some electricity for stabile fixed price for certain period of time. In such case IES reduces part of business risks related to spot price, if it raises higher then consumer pays IES.

Spot price (price for each hour) may depend on various factors, such as weather conditions, fuel price, unexpected consumption fluctuations, water level in reservoirs, windy/sunny days, transmission capacities/limitation between countries, maintenance (generators/grids), local generation quantities and costs.

 

14.  When is the best time to switch/choose IES? (Winter or Summer)

We cannot stop or temporary not to consume and accumulate electricity for the future. So Electricity supply may not be interrupted. When one contract term ends, another term must start immediately. There is no unambiguous answer when is the best time to switch IES or change contract terms. However consumer may reduce complexity of switch process and sign best possible contract if he actively plans, searches for information, assigns budget and prepares for negotiation.

 

Providing signed contract is valid for 12 months starting first day of the year, so new contract terms are annually negotiated and this cycle will match business planning cycle of the company (consumer), its rivals, partners and suppliers and also ESO pricing validity terms. This annual cycle should leave less gray zones in budgeting processes and allow better midterm planning, setting company objectives and assigning tasks for employees.

 

15.  Is it safe to switch for IES?

IES started active operations in Lithuania back in 2010.  Industry is regulated by a number of constantly developed laws and rules under close supervision of independent regulatory body VKEKK.

Proper regulation proved in practice that industry steady develops, liberalized market proved to ensure safety of supply, but also increased consumers freedom of choice.

Security of supply to the end consumer is legally guaranteed public supplier ESO.

Let us review possible scenario when selected IES stops operations and shall no longer conducts its contractual obligations and will stop supply of electricity to consumer:

IES notifies customer 30 days in advance that as of the 1st day next month will stop supply of electricity.

 

In this case consumer can:

  • Choose another ISE, who will supply electricity as of the 1st day of next month.
  • If this is not done on time (normally at least 15 days prior supply starts), ESO as public supplier, start selling electricity to consumer as of the 1st day next month and consumer may choose IES any time later whenever finds appropriate.

Similar procedure (unless electricity supply contract states differently) is foreseen in case if consumer makes decision to stop contract with current IES.

 

16.  Why Nord pool spot power exchange does not secure low electricity price in Lithuania?

Lithuania is a part of NPS as independent price zone so are our neighbor Latvia and Estonia. Spot price is set every hour for each price zone using unified and agreed calculation formulas. Prices may appear the same for different price zones (that is the point of single energy market), this happens when transmission between price zones is sufficient, so supply/demand is in balance and this is the case when prices in Lithuania and Latvia price zones fit. However in Estonian price zone prices are more often different.

 

This happens because on the border from Estonia to Latvia we have insufficient transmission capacities and cheaper Nordic electricity cannot flow towards Lithuania. That may change in 2016 when international grids NORDBALT and POLLINK will connect Lithuania with Sweden and Poland. Price differences should be lower or even disappear.

 

At the same time electricity flowing from North is possibly blocking electricity that flow form opposite direction (Byelorussia) and this potentially can create gap in supply for specific hours witch pushed price up dramatically in Lithuanian zone.

 

17.  Which option is better for consumer, fixed or flexible pricing?

Several pricing solutions exist that IES offer to contract, among them:

a)      Fixed price valid for the contract period

b)      Flexible price – spot price + IES margin

 

Which is better for consumer depends on his objectives. Ones who seek stability will choose fixed option, others, who are willing to take risks, will sign for flexible options.

 

However some basic things that may help consumer to make his choice are listed below:

a) Any suppliers must receive honest reward for services provided,

b) In case IES contract is spot + margin, he has on risks but guaranteed margin. All spot price related risks remain with consumer.

c) In opposite situation – IES keeps full risk on himself if he signs contract to sell at fixed price

d) Any pricing option cannot guarantee lowest price, it only defines different level of shared risks

ESO will include its losses into regulated prices of coming period. Same could be expected among IES, but their prices are not regulated and depend on competitive situation on the market.

 

18.  How can end consumer save electricity costs without lowering consumption?

Price that consumers pay to ESO or/and IES is not the only thing to be considered if consumer tries to reduce electricity costs. Things to be considered:

  • Installing smart metering, / mobile hourly data  exchange;
  • Shift from single time zone to available day/night or even 4 time zones metering
  • Analyze historic and plan future electricity consumption;
  • Work on budget for electricity;
  • Teach and develop respective staff.

Calculation shows in practice, that electricity cost (considering hourly spot price) may be higher for the customer without smart (hourly) meters. As the result, IES will submit its offer with reasonably different prices for customers with and without smart meter. Paraxial – the larger consumer – the bigger IES risks if no smart meters are installed.

Also loyal consumers may expect mutual benefits when expecting new price proposal from IES.

We kindly suggest contacting us if you would like to know more details on that matter.

 

19.  My company uses a lot of electricity, but my smaller partners will Always get better prices from IES, why is that?

Energy consumption profile is very important for your final price offers from IES (so you work on weekends, is your consumption flat during the 24 hours, or may be opposite, you use a lot in the morning  and during the day, later on you stop consuming and you company is closed for weekends ). That is even more important than your total annual consumption in kWh. This is why price offers may differ.

IT worth discussing with IES if and how changing your consumption profile can effect price offerings.

 

20.  How can different price offers be compared?

 

You may compare annual amount or weighted average (never compare tariffs). See example below, hoe misleading comparing tariffs can be:

skaiciukai_en

 

Which one you like best?

  • You also may compare offered supply term (from…to). In order to compare different supply offers, supply terms should be equal, if they do not – Always ask why? What is price offer if you need different period of supply. Is it acceptable for you in this case?
  • Early contract termination terms. If they are different, what that means to you. Is it acceptable? What are mutual rights and obligations? Are booths side equally treated?

 

Important to remember – in all cases it is consumer who makes final decision and chooses.

 

21.  Whom I may contact in case of raising conflict with energy company?

Any conflicts between customer and energy company should be solved by mutual agreement. In case this is not possible, any party can contact regulatory body (VKEKK) in regards contract terms, National Energy inspection in regards to metering, and National consumer’s rights protection board in regards to quality of services provided.