Finland to promote smarter electricity systems and consumer participation on the markets

To support the development of electricity markets and implement the Electricity Directive (2019/944), Finland’s Ministry of Economic Affairs and Employment established the Smart Grid Working Group in 2016. The group aimed to empower customers to actively participate in the market while ensuring reliable electricity supply, culminating in recommendations published in its 2018 final report.

While many of the suggestions have already been implemented through legislative changes, some have remained unaddressed and are now brought back on the agenda with the new government proposal (HE 197/2024) for amending the Electricity Market Act.

Harmonisation of distribution fees

Currently, the pricing structures for electricity distribution vary between networks, with different fee components and temporal factors. Through standardising the fee structure, the government seeks to promote adoption of demand-based charges, enhance network cost-effectiveness and align costs with the polluter pays principle, while also making fees more understandable for users.

The amendment proposes to standardise the fee structures by providing a “toolbox” of components – a basic fee, an energy fee and a capacity fee as well as a reactive power component for users with larger main fuses, all commonly used in pricing today. From these building blocks, the network companies could, much like today, structure their fees as preferred.

Single invoicing of grid services and electricity sales

Customers, as a rule, conclude separate contracts for electricity supply and distribution, with the retailer and the network company also billing their fees independently. The proposed joint billing system would maintain the two-fold contractual relationship but allow customers to opt for a single invoice covering both services, provided their retailers volunteer such a billing option.

In the new model, retailers would manage billing and payment collection on behalf of themselves and the relevant network company. As this would remain voluntary for retailers and customers (with network companies obliged to contribute), separate invoicing according to the current model would coexist as the parallel option. To minimise credit risks, large electricity users would however be excluded from this system.

Transition towards dynamic market-based load control

As the energy system has grown more multilateral and multidirectional, a shift from static load control to market-based load management is considered appropriate to create a more competitive environment and give users power over how their consumption is managed.

Much of electricity consumption with flexible capabilities is presently subject to load control linked to the time of day, managed by network companies. The idea is that in the future end-users could authorise an electricity retailer or other market participant to directly control their loads via a connection to their smart meter. As with single invoicing, the new system would function on a voluntary basis and end-users choosing not to participate in the market-based load control would remain under the existing system.

These changes aim to create a smarter electricity system and maintain security of supply, while enhancing customers’ opportunities to actively participate in the electricity market. In addition to these changes, the government proposed other measures focused on consumer protection, such as rules for entry into force of electricity sales contracts and restrictions on termination fees for fixed-term and fixed-price contracts.