Electricity is an essential service, without which people cannot get along in modern society. Such services are subject to special requirements with regard to access and economy. Power companies have a statutory obligation to deliver electricity at a reasonable price.
Provisions were added to the Electricity Market Act when competition was opened in Finland to ensure the position of consumers who are unable to get bids from different suppliers. All consumers must have access to electricity.
The obligation to deliver electricity means that an electricity retailer in a dominant market position must supply electricity to customers at a reasonable price.
According to the commentary to the Act, prices are reasonable if they correspond as closely as possible to the costs of delivering electricity to customers within the sphere of the obligation to deliver.
Within the sphere of competition retailers have the right to vary prices on a case-by-case basis. They may not use charges within the sphere of the obligation to deliver to subsidize lower prices, however.
The same supplier's prices within the sphere of the obligation to deliver can be considerably higher than prices within the sphere of competition. We can well ask whether prices within the sphere of the obligation to deliver correspond to costs as required by law or whether they are used to subsidize lower prices for customers taking advantage of competition.
If large discounts are offered to customers who are able to take advantage of competition, there is good reason to suspect that there is also room to reduce prices within the sphere of the obligation to deliver.
Directive calls for universal service
Electricity suppliers have criticized the present system with the obligation to deliver for reducing market flexibility. Two sets of prices in the same area also cause confusion.
The system cannot and should not be eliminated, however, since the Directive concerning common rules for the internal market in electricity (2003/54/EC) says that member states shall ensure that all household customers enjoy universal service, that is the right to be supplied with electricity at reasonable, easily and clearly comparable and transparent prices.
It is important to ensure access to essential services such as electricity to all consumers in all conditions through legislation. It is also important for statutory requirements concerning reasonable prices and cost equivalence within the sphere of the obligation to deliver to receive concrete content in the prices that suppliers charge consumers.