The high electricity taxes have no rational justification, according to market leaders.
On behalf of NorgesEnergi, Ipsos has charted Norwegians’ attitudes towards various electricity topics. And despite record low electricity prices, 46 percent answered that they think the level of electricity tax is very high.
– Electricity is a vital necessity. High government taxes on a life necessity are completely incomprehensible, NorgesEnergi’s CEO Hans-Erik Ramsdal told Nettavisen Økonomi.
– There has been a lot of talk that the price of electricity has been historically low for the past year, but people have still received high bills. The high level of electricity costs to the state and grid rent has thus become much more visible to people. I understand that people think it is too much.
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Respond even more in the survey to the net rent. No less than 53 percent believe that the network rent is very high. Ramsdal says we need quite a debate about the tax burden on electricity. The high government rates are in addition to VAT and grid rent.
– Taxes on tobacco and alcohol have a socio-economic justification in health. Such taxes are in stark contrast to the electricity tax, which has no rational justification, Ramsdal says.
– What do you think?
– I think the tax level may be high because this is pure energy.
Recent figures from Statistics Norway (SSB) show that of the total electricity price in the third quarter, the electricity price itself was only 20 percent. The network rent was good for 39 percent, the other fees 41 percent. The total electricity price for households was just under 73 øre.
The electricity suppliers naturally compete mainly on price in the battle for customers, where the variation is the mark-up in the margin of the suppliers. According to the research, price is by far the most important factor in choosing an electricity supplier.
– Price competition is good for the consumer, because it produces cheaper electricity. But then there are a few companies that are completely shielded from competition, but that do take up a large part of the bill.
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– Network rent is paid to a monopolistic market consisting of the network companies. They do an important job, but I find it frustrating that consumers account for so much of the bill for necessary infrastructure, Ramsdal says.
Ramsdal says it is not necessarily surprising that so many are negative about the high fees. But it is surprising that the cost and infrastructure make up an overwhelming part of the total electricity bill.
– How do you think the electricity price system and tax regime should ideally have come about?
– It is up to the politicians to discuss it and put it on the agenda. But we believe it is not certain whether it is right with such high taxes on a vital good.
– When it comes to grid rental, it should be cost-based, but we see it varies slightly from area to area in the country.
– But is it true that electricity customers also have to pay for the infrastructure?
– Yes, but they are asked how they do it. There is a lot of infrastructure in society that is based on other models. And if the grid rent and fees are more than 50 percent, we think that’s too high and worth putting on the agenda.
He believes it is complicated for many customers to understand the different elements of the electricity bill, and customers believe NorgesEnergi will charge the full invoice amount. They don’t, most of the state is running away.
In September, NVE had to scrap the so-called electricity coupling for households, a surcharge if the electricity consumption of the customer is maximum.
– For most people it can be complicated to get acquainted with a difficult model, but it must be profitable to make changes in your own consumption. Consumption is the biggest impact you can do something about, says Ramsdal.
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– What do you think of electricity prices in the future?
– Prices change rapidly, but now we have had low prices since February, occasionally interrupted by some increases. As far as we can see, there will be low prices until the new year, but around cold spells and other things that can happen there is always some uncertainty in the winter.
– But the market prices say that the electricity price will be low in the 1920s, while kWh was well above 50 øre at the highest winter 2019, Ramsdal replies.
As a rule of thumb, at normal electricity prices, an average household can expect about NOK 15,000 in total annual electricity costs. It is based on NOK 1 per kWh, including grid rent and fees, and a consumption of approximately 15,000 kWh per year.
According to the latest statistics from Statistics Norway, only 2 percent of households had opted for fixed-price contracts. In other words, they had chosen to link the electricity price for a certain period of time, because one would link the interest on a loan for predictability.
With spot price agreements, the electricity price will vary with market fluctuations, such as the interest on a variable mortgage.
– In general, the bargain price is cheapest over time and especially what we recommend, Ramsdal notes.
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