Exchange Electricity is currently the most favourable electricity contract
Types of electricity contracts in Finland
There are some differences between electricity contracts, and they can have a large impact on the amount to be paid on electricity bills. However, choosing the best contract has recently been perhaps more difficult than ever.
Mainly, the electricity contracts are divided into so-called exchange electricity (or market priced electricity; in Finnish, pörssisähkö), electricity contract for an indefinite period (in Finnish, toistaiseksi voimassa oleva sähkösopimus) and fixed-term electricity contract (in Finnish, määräaikainen sähkösopimus). Each of them has its own pros and cons for the consumer.
It is best for each household to consider for themselves which of the available options best suits their current situation. Nevertheless, the recent large and surprising price changes raise concerns even among experts.
Fixed-term electricity contract. Määräaikainen sähkösopimus
The main advantage of a fixed-term electricity contract is predictability. The price per kilowatt hour remains the same throughout the contract period, which has traditionally been two years. Changes in the electricity bill are therefore mainly due to changes in own consumption. For example, those who signed a fixed-term contract in 2021 have been in a good position recently, because the record prices of stock exchange electricity have not been reflected in their electricity bills at all.
From the other side, the main disadvantage of a fixed-term contract is that it can be difficult to terminate it in the middle of the contract period, even if you can get electricity at a much cheaper price from the market. So, some of the consumers signed a fixed-term electricity contract at the end of last 2022 year and, as a result, they have suffered a lot from this decision as the prices of fixed-term contracts were clearly higher than today. The fixed-term contract can be terminated by moving to another address, but often contracts give the option of termination with an additional fee.
Exchange electricity contract. Pörssisähkö
Exchange Electricity is an electricity contract according to which the price of electricity varies by the hour based on the stock exchange electricity price. The prices for electricity under such kind of contract are typically lowest in the evenings, at night and at weekends. Therefore, it is possible to impact on the electricity bills by monitoring and planning the electricity consumption.
The exchange electricity contract follows the actual hourly price for the Finnish area on the NordPool electricity exchange (Nordic electricity exchange). The prices for the next day are published every day around 14:00.
In the long run, the exchange electricity contracts have traditionally been cheaper, especially for those consumers who have opportunities and the ability to schedule electricity consumption.
In addition to the exchange price, the consumer has to pay the margin charged by the electricity seller and, of course, the tax. You can monitor the fluctuation of the exchange electricity price via a phone application, and schedule, for example, laundry at a time when electricity is cheap. If you wish, you can terminate the exchange electricity contract with two weeks' notice.
Electricity contract for an indefinite period. Toistaiseksi voimassa oleva sähkösopimus
Electricity contract for an indefinite period is an intermediate form of exchange electricity and a fixed-term contract. The price of electricity for the consumer does not vary hourly, but the electricity company must notify the price changes at least one month in advance.
Compared to exchange electricity contracts, they offer some kind of predictability in the price, when the price of energy is fixed at least for some time. Like the fixed-term contracts, the prices of electricity contracts for an indefinite period are determined on the basis of future electricity prices, but with a shorter term. The electricity company may review the contract prices regularly, for example four times a year. Such kind of electricity contracts that are currently valid for an indefinite period are generally more expensive than exchange electricity contracts or new fixed-term contracts.
Helen (the electricity company in Helsinki) has announced that it will reduce the prices of electricity contracts for an indefinite period by an average of 48 percent from the beginning of April. The reason for the price reduction is the decrease in electricity procurement costs.
It is assumed that the prices of electricity contracts for an indefinite period will decrease over time to be cheaper than fixed-term contracts.
The indefinite contract can be an interesting alternative for those who cannot schedule their consumption, but use electricity also during more expensive hours.
The full information and the source text can be found at Ilta Sanomat website.
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Published 19.02.2023, FINREPO
