The Norwegian Directorate for Water Resources and Energy (NVE) has proposed a 20% penalty for excess electricity consumption. However, this was such a far-reaching move that the proposal was rejected by both the energy industry, environmental organizations and the Council Consumer Protection. The new proposal will appear within a few months - consultations must first be carried out.
Penalties for excessive electricity consumption
NVE proposed that each user of the power grid should buy a kind of "subscription" to electricity. It was to be paid in advance for a specified period of time and was to be a declaration of the expected amount of electricity used. Any excess would result in a penalty equal to the basic price per unit of energy plus 20%.
Widespread criticism of the project
Both environmental organizations and the entire energy industry unanimously criticized NVE's proposal. Representatives of the electrical industry raised arguments that a system based on forecasting electricity consumption for a given period would force customers to guess prices, e.g. for the entire coming year. Such action is practically impossible in a country where both the consumption and the price of electricity are determined by the weather conditions and the water level in storage reservoirs. These two factors cause high volatility in electricity price levels.
"Too much whip, not enough carrots"
Consumer organizations, in turn, pointed out that the NVE proposal focuses too much on "whip, not carrot". By this it should be understood that consumers should be encouraged to limit their electricity consumption rather than penalizing them for consuming too much. The organizations are accompanied by the Consumer Protection Council and the entire energy industry. Everyone agrees on one thing - the electricity consumption billing system in Norway is already complicated. They also speak with one voice regarding the fact that electricity should be billed on the basis of actual consumption, with differentiated rates. During peak demand hours, the price should be higher, and correspondingly lower outside of these hours.
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We will not avoid further price increases
Although the NVE proposal was unanimously rejected, sooner or later an increase in electricity prices is to be expected. This is due to extensive investments in the transmission network. The purchase and installation of AMS smart electricity meters alone cost NOK 10 billion, and this cost was covered from transmission fees.
According to representatives of NVE and the energy industry, the current transmission infrastructure is not sufficient even in the context of the current demand for electricity. Not to mention the projected consumption in the coming years. The problem areas include the growing energy demand resulting from the growing number of electric cars, as well as the increasingly unpredictable electricity production. It is for these reasons that since 2015 a total of NOK 140 billion has been allocated to the expansion of the transmission network.
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In its consultation document, NVE wrote that: "With this level of investment, expect electricity prices to increase by around 30% by 2025". Therefore, it should be assumed that this year's increases were not a one-off incident and only partially were related to large energy exports abroad in February. It turns out that the biggest reason lies in the scale of investments in the transmission network.
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