The price of electricity is usually between 5 and 8 cents per kWh, depending on the electricity contract. In practice, the price of electricity is always expressed in cents per kilowatt hour (kWh) in consumer transactions. The kilowatt-hour is the unit used to measure electricity consumption and is used in electricity pricing.
The total price of electricity is made up of many different factors, and the price of electricity varies both electricity contracts and the fluctuations of the stock market.
Rapid price rises and falls in the electricity market have led many Finns to pay increasing attention to the content of their electricity bills. Electricity is a significant expense, especially for Finns living in larger households and those who own several properties. So what does the price of electricity consist of and what factors influence its price?
What makes up the price of electricity?
The total price of electricity is made up of three different components: the electricity energy component, electricity transmission and various taxes, such as electricity tax. Under an electricity contract, the price of electricity consists of a fixed basic charge, normally charged monthly, and the amount of energy consumed, which can vary significantly between households and properties. Electricity is also billed slightly differently electricity contract depending on the type.
Price of electricity
The consumption charge, i.e. the price of electricity, is always the same for universal electricity (snt/kWh), whatever the time of day or season. For time-of-use electricity, the consumption charge is divided between day and night, while for seasonal electricity, the consumption charge is divided between winter electricity and electricity used at other times of the year.
Depending on the contract and the market situation, the price of electricity is usually between 5 and 8 cents/kWh. For exchange electricity, price fluctuations can be significantly higher, ranging from zero to more than 20 cents/kWh.
Price of electricity transmission
Electricity transmission is the transport and distribution of electricity from an electricity utility to a consumer. This task is always carried out by the local distributor, which is why it is not possible to put electricity transmission out to tender. The price of electricity transmission consists of two elements: the basic charge and the amount of energy transmitted.
The rest of the electricity price is a tax. In addition to electricity and electricity transmission, consumers pay VAT, electricity tax and a security of supply levy on their electricity. The electricity tax is billed together with the electricity transmission and its amount is affected by the amount of electricity consumed. Currently, the electricity tax is charged at around 2.79 cents/kWh.
Electricity price composition
When looking at the electricity contract as a whole, the share of electricity, electricity transmission and taxes is usually split more or less equally. As a rule of thumb, about one third of the electricity price paid is made up of electricity, one third of electricity transmission and the rest of taxes.
Will the price of electricity always stay the same?
The price of electricity does not always remain the same, as pricing is influenced by a number of factors. The price of electricity is determined by the costs associated with electricity production, the source of electricity (e.g. mixed, bio-electricity, fossil-free) and the current market. Consequently, changes in the market - for better or worse - are also directly reflected in the price of electricity.
The price of electricity also varies significantly from electricity companies depending on supply, and variations between companies can be large. For this reason, competitive tendering for electricity contracts is important.
Buying electricity on the Nordpool exchange
The Nordic countries have their own common electricity exchange, Nordpool, where all electricity producers sell their electricity. This allows local electricity companies to buy their electricity and then sell it on. Similarly, they can also produce their own electricity in local power plants and sell it to consumers.
Factors affecting the price
If the cost of generating electricity rises, the price of electricity will also rise. In the Nordic countries, the main factors affecting the price of electricity are not only production costs, but also weather conditions.
In the Nordic countries, much electricity is generated from hydro and wind power, which means that changes in weather conditions also affect the price of electricity. For example, consumers may find that in colder than normal winters, the price of electricity spikes.
Transfer prices often stable
Unlike electricity, transmission prices for electricity tend to remain relatively stable. This is because the distribution companies responsible for the transmission of electricity have a so-called monopoly position, which makes it impossible to put electricity transmission out to competition.
The area affects the transfer price
However, there may be regional differences in electricity transmission prices. Generally speaking, in more densely populated areas, electricity transmission prices are cheaper because the costs of electricity distribution are lower. In less populated areas, electricity transmission costs increase. However, transmission companies cannot charge consumers what they want, as transmission pricing is controlled by the Energy Agency. The amount of electricity tax is decided by Parliament.
Impact of the type of electricity contract on the price of electricity
It is worth bearing in mind that the price of electricity is also affected by the type of contract. A contract can be either a fixed-term contract or an open-ended contract in terms of its duration and binding nature. However, the price of electricity is more influenced by the type of contract billing - electricity can be billed either as a fixed package, as a fixed price per consumption, or as a so-called "flat rate". stock exchange. Of these, exchange-traded electricity has been the cheapest type of contract in the long term, but on the other hand, short-term price fluctuations can be quite large for this type of contract.
Fixed-term electricity contract
Fixed-term contract in this case, the consumer must pay for the electricity to the declared electricity seller for the duration of the contract. A fixed-term contract cannot normally be terminated except in the event of a move. In the case of a fixed-term contract, the price of electricity varies at predetermined times. The duration of fixed-term contracts is usually 24 months. In general, electricity companies offer fixed-term contracts at a lower price than open-ended contracts.
Agreement for the time being
Electricity contract for an indefinite period is a contract that can normally be terminated at any time. In this type of contract, the price of electricity is usually market-driven and is reviewed from time to time according to a schedule specified in the contract.
Also, most exchange-based electricity contracts are often open-ended electricity contracts. In most cases, prices are higher for open-ended electricity contracts than for fixed-term contracts, and the margin for an open-ended exchange-traded electricity contract, for example, may be higher than for a fixed-term contract.
Fixed price and exchange electricity
In addition to fixed-term and open-ended contracts, there are two different types of electricity contracts: fixed-price and exchange-price electricity contracts.
In the case of exchange electricity, the price per kWh of electricity is directly linked to the current market situation, i.e. if demand for electricity rises, the price of electricity also rises. Conversely, the less demand there is for electricity, the cheaper it is. The price of electricity on the exchange fluctuates constantly. The changes are usually not large, but in this case, fluctuations can occur on a daily basis. The price of exchange electricity is determined by the price of electricity as recorded on the Nordic electricity exchange Nordpool.
The price of fixed-price electricity is similar to a fixed-term electricity contract. In this type of electricity, the price of electricity remains the same as long as the electricity contract is in force. Currently, most electricity contracts signed by Finns are fixed-price contracts.
Where can I find the cheapest electricity contract?
The cheapest electricity contract can be found through competitive tendering. The companies selling the cheapest electricity are changing frequently, which means that the cheapest electricity contract may no longer be with the same company as before.
As electricity consumption is a major expense in many Finnish households, it is important that everyone pays attention to their electricity contract. In Finland, electricity contracts can be freely tendered for electricity. It therefore does not matter where in Finland you buy your electricity, as the local distribution company is always responsible for the distribution of electricity. The cheapest electricity contract is therefore easiest to find by comparing the contracts of different electricity companies.
Electricity market prices live and change according to the current global situation. For this reason, companies selling electricity must also update and change their prices on an ongoing basis. This is why it is important to remember to put your electricity contract out to tender at regular intervals, as an electricity contract signed a few years ago may already be the most expensive today.
In short, the price of electricity consists of three main components: the price of electricity, the price of the electricity transmission service and various taxes, namely VAT, electricity tax and the security of supply levy.
Although the rule of thumb is that each component accounts for about one third of the total electricity bill, the different components of the price are also influenced by where the electricity is used and how much electricity is consumed.
Electricity tendering brings savings easily
By tendering your electricity contract through us you can easily influence how much you pay for electricity. The easiest way to compete for electricity is to include your most recent electricity bill. You can also tender for electricity without an electricity bill if you know the address of the site and can estimate the electricity consumption as accurately as possible.