Electricity in Latvia is cheaper than in Lithuania and Estonia – Sadales Tīkls

Compared to its Baltic neighbors

It is not often that a specific enterprise is awarded parliamentary hearings. The joint stock company Sadales Tīkls (ST) spoke at the Saeima Commission on Long-Term Development, since it is, firstly, a state corporation (100% owned by Latvenergo), and, secondly, a system-forming link in the Latvian economy.

“Service 24/7. Continuity of action also in crisis situations. Two interruptions in power supply to customers per year,” this is how ST talks regarding its own activities. Of course: you can’t praise yourself…

But, in fact, Latvia has the lowest rate of long-term (over 12 hours) power outages among the Baltic states – more than 10 times lower than in Estonia, and more than 22 times lower than in Lithuania. The company’s losses for the year amount to 3.73%, while in Estonia 3.75%, in Lithuania 4.23%.

The difference between the networks of three seemingly similar republics is great: in Lithuania, the length of electrical networks per client is 40% less than in Latvia. Accordingly, there are 14.6 clients per 1 km, in Estonia – 8.4, in Latvia – 8.5.

Estonians, meanwhile, on average consume approximately twice as much electricity per client as residents of Latvia – 14,117 and 7,908 kilowatt/hour, respectively. Lithuania is in last place with 6,531.

Lithuania, on the other hand, has the most expensive electricity network – per 1 km it is 5,001 euros, in Estonia – 4,072, in Latvia – 3,493.

An analysis of the costs incurred by new customers when connecting electricity presents ST in a more favorable light: production facilities and higher schools pay regarding 1.4 times less for electricity than in Lithuania and Estonia. As a result, ST emphasizes, the investment environment in Latvia is improving and the inflationary mechanism is not spinning up.

The same applies to households: “The tariff in Latvia is in most cases more profitable or equivalent to the tariffs in Estonia and Lithuania.” From January 1, 2024, the 60% reduction in fixed costs was replaced by a new “growth cap” solution.

How the tariff is formed

Currently, in Latvia there is a special Law on reducing measures for emergency increases in energy prices. The cost of Sadales Tīkls services is currently determined by the Public Services Regulatory Commission. Correction occurs annually. Thus, for the period of 2024, with a regulatory account balance of 8.2 million euros, a reduction in the fixed part of the tariff by 7–11% and the variable part by 1% was envisaged.

The cost of electricity distribution is affected by: the price of electricity itself; volume of consumption; transfer price; other costs, including “due to unplanned changes in external regulations or emergency situations.” However, in case of excess income or unforeseen savings, the operator is obliged to reduce the tariff.

State support implies predictability of tariffs – for example, in the period until December 31, 2025, the maximum possible increase in costs during the year for individuals will be from 2 euros (single-phase connection at 16 amperes) to 6 euros (three-phase at 25 amperes). The most powerful connections – starting from 32 amperes – are not subject to tariff restrictions.

If we take the average household in an apartment building with the most common characteristics – 1 phase, 16 amperes, 100 kilowatt hours per month – then the average bill will be 26.21 euros per month. Of this, Sadales Tīkls itself will take 28%, the price of electricity will be 55%, and value added tax will be another 17%.

Chairman of the parliamentary commission Ugis Mitrevics (National Association) noted that no one would like to relive what the residents of Latvia faced in the electricity sector a couple of years ago. Predictability of costs is a great thing, especially for a monopoly enterprise.

“If something like this happens, then the state budget, or the state enterprise Latvenergo, will take on this turbulence,” said the politician. – So that the population is not presented with a fact – they say, you will have to pay for everything.