Chamber of Commerce: universal service is not available to enough entrepreneurs

The Economic Affairs Committee of the Parliament of Estonia is debating a bill to amend the Electricity Market Act, which will give micro and small businesses the opportunity to buy electricity as a universal service until the end of 2023, similar to home consumers. The Chamber of Commerce considers that the bill is not sufficient to support companies and ensure their competitiveness, and a large number of companies may not be able to use the universal service.

Only very few companies benefit from universal service
In its response to the committee, the Chamber finds that only a small number of micro and small businesses will benefit from the changes. The main reason for this is that many micro and small businesses rent real estate, in which case the electricity contract is signed by the landlord and the micro and small businesses pay the electricity costs to the landlord.  In other words, if the landlord is not a micro or small business, then according to the bill, the tenants also cannot switch to universal service.

The chamber estimates that in reality it is possible for less than half of micro and small businesses to switch to universal service, therefore a solution must be considered where universal service can also be used by those persons who supply electricity to micro and small businesses. 

The criteria for micro and small enterprises need to be clarified
The Chamber of Commerce points out that the bill and explanatory letter do not describe in sufficient detail how the evaluation of the criteria for a micro-enterprise or small enterprise is carried out. Currently, the Electricity Market Act states that a micro-enterprise is a business that employs less than 10 people and whose annual turnover or annual balance sheet does not exceed two million euros, and a small business is a business that employs fewer than 50 people and whose annual turnover or annual balance sheet does not exceed 10 million euros.

For example, such definition raises questions about how the number of employees is estimated. Do they include people working under both an employment contract and with a contract under the Law of Obligations Act? The question also arises, what happens if the company has just started operations and the table published by the Tax and Customs Board shows only one quarter's turnover or no turnover at all? In practice, such ambiguities can give rise to disputes as to whether the company is entitled to use the universal electricity service intended for business customers or not.

According to the Chamber of Commerce, even when the bill enters into force, electricity sellers will have a very heavy burden to determine which companies have the right to switch to universal service. The workload is even greater if the electricity seller has to check compliance with the criteria not only at the conclusion of the contract, but also during the entire contract period. Checking the criteria is a craft for the electricity seller, or a technical solution has to be developed for a very short period of time, which makes the service more expensive for business consumers.

The universal service should also be extended to larger companies
The chamber considers that if the changes planned by the bill are extended to medium-sized companies, it would be possible to use the universal service for a very large part of Estonian companies. Such solution would better comply with the principle of equal competition and would better help alleviate the problem of high electricity prices and thus ensure the competitiveness of Estonian companies, especially in a situation where other member states offer support measures to medium-sized companies.

Mait Palts, Director General of the Estonian Chamber of Commerce and Industry, emphasized that it is very important that the measures that are to be implemented to help, start really and quickly, and that there are also measures that help larger companies alleviate the problem of high electricity prices. "Medium and large companies are often at the top of the production chain, and if the bigger ones are not doing well, it immediately has a negative effect on smaller ones as well," Palts said. 

Furthermore, when developing support measures, the consequences should also be considered if large companies are forced to reduce their operations and lay off staff due to high electricity prices. In this case, social protection costs may increase and tax revenues may decrease at the same time. As one solution, the state could consider expanding the universal service to large companies and request a state aid permit from the European Commission. If this proposal is not supported, some other solution should be found to support large companies in relation to high electricity prices.