Monday, January 17

Despite the state’s electricity package: Expect more than double the electricity bill for December compared to previous years

Norwegian families will more than double their electricity bill for December this year compared to what they have paid in previous years. This applies even if the state this year takes 55 percent of the costs over 70 øre per. kWh.

On 11 December, Prime Minister Jonas Gahr Støre and Minister of Petroleum and Energy Marte Mjøs Persen presented the government’s electricity package.

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The average electricity price for southern Norway traded on the stock exchange NordPool appears to be 177 øre for December. Thus, it is now possible to calculate how much support the state will give to households in southern Norway for the Christmas month.

The average price in Trøndelag and in northern Norway seems to be 61 øre.

Those who live there are thus so unlucky that they fall below the state support limit of 70 øre.

The government itself has used two examples:

One is a (probably one-man) household in an apartment with an annual consumption of 11,000 kWh. Given a standard consumption in December, such an electricity customer in southern Norway will receive approx. NOK 980 in support, shows Aftenposten / E24’s calculation.

But this person’s total electricity bill, including grid rent and fees, still comes to around 2,750 kroner. This is given that he has a favorable spot price agreement without any surcharge.

The government’s second example is a family in southern Norway in a detached house that uses 26,000 kWh a year. This family will receive a support of approx. 2400 kroner for December. But the total electricity bill for the family still comes up to approx. 6,500 kroner.

See also the figure below here for other levels of electricity consumption in December.

The field that is colored purple at the top of each bar is how much government support shaves off the total electricity bill for December. The blue field is how much the electricity bill of a household then eventually ends up being.

All calculation examples are for customers of Norway’s largest network company Elvia, which has almost one million customers. And it is given that the average price for December lands at 177 øre on NordPool.

The electricity bill more than doubles

Despite the government electricity package, the electricity bills for December will be quite high.

In the years 2016–2020, the average price of NordPool for the month of December in southern Norway was 34 øre, compared to 177 øre this year. This is an increase of over 400 percent.

Because the state covers 55 percent of the price over 70 øre pr. kWh and the grid rent has been fairly stable, so the total electricity bill in December does not increase nearly as much.

But compared with the average of the electricity bills for December in the years 2016–2020, the electricity bill for Norwegian families more than doubled in December this year.

And so this is after that the state has given its support for December.

See also the figure below. The calculations are given a number of assumptions about no changes in the grid rent in recent years and that the customer has always paid the spot price without surcharge.

The calculations are therefore somewhat rough. But they still state reasonably well the levels of difference on the electricity bill in December this year and the average bill for the previous five years.

The state covers 27 percent in December

The actual calculation for the state’s support is that the state charges 55 percent an electricity price of more than 70 øre per. kWh. This 55 percent is calculated from the average stock market price for December. As mentioned before, it looks to be 177 øre.

This means that the state covers 58.9 øre per. kWh, or 33 percent, of the average electricity price at NordPool in southern Norway for the month.

But because the grid rent comes at the top, so falls the state’s share of the total electricity bill to a household in December this year down to around 27 percent.

Government reduction of profits

It is nevertheless wrong to say that the state takes 27 per cent «of the bill», or that the state bears 27 per cent «of the cost».

Because even though the state covers 55 percent of the electricity price over 70 øre, the state still earns on every øre that the electricity price rises.

Aftenposten / E24 has previously estimated that between 60–70 per cent of the profits of the power industry in Norway end up with the state.

This is done through a combination of taxation of the profits for all power producers and increased retained earnings and dividends from the state’s own power company Statkraft.

With today’s sky-high prices, every penny of electricity prices rises is considered pure extra profit.

Even though the state covers 55 per cent of electricity prices above 70 øre, the state still earns between 5–15 per cent on every øre, or every krone, the electricity price rises beyond 70 øre.

It therefore becomes more correct to say that the state’s gain is reduced through the government’s electricity package.

The electricity package thus reduces the state’s gain for the month of December by approx. 3 billion.

This is given that all the country’s households have had an electricity consumption in December this year which is more or less the same as in previous years.

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