Go to content

CHAPTER 6

""
Isoisänsilta Bridge in Helsinki, Finland. Photo: Unsplash / Taipo Haaja

6. Finland

6.1 Regulatory framework and organization of the market

The Finnish regulatory framework is based on alignment with the EU and Nordic common electricity market. However, there are some national differences given the leeway in the international regulation.

6.1.1 Relevant authorities and actors

The Finnish actors in the electricity markets resemble those of the other Nordic countries. The central authorities overseeing the market are the Energy Authority, the NRA of Finland, and the Consumer and Competition Authority. The market participants’ representation is focused on a few special interest groups on both supply side and demand side, taking part in the public discourse, acting as proponents of their interest groups in different regulatory development forums, and providing support services for energy companies and consumers. These actors in the electricity market are described further in Table 6‑1.
Table 6‑1: Actors and relevant regulations
Role
Name
Responsibility
Regulatory authority
Energy Authority (Finland)
The Energy Authority (Finnish, Energiavirasto) is the authority regulating the energy sector, covering the electricity and gas markets and networks, renewable energy, EU emissions trading, and energy efficiency domains. The role and mandate of the Energy Authority is dictated by the Energy Authority Act and includes the tasks to regulate, monitor and improve the functioning of electricity markets. The Energy Authority maintains the comparison tool Sahkonhinta.fi.
Consumer and competition authority
Kilpailu- ja kuluttajavirasto, KKV
The Finnish Competition and Consumer Authority’s (FCCA) role is to ensure the efficient functioning of the market to benefit the national economy and consumers. The tasks of the FCCA are given in the Act on FCCA, including a proactive role in initiating activities regarding developing competitiveness, dismantling anti-competitive practices, and developing consumer policies. In addition, it is tasked to monitor competitiveness based on the Competition Act, to organize studies within its domains, and to organize consumer guidance, as well as a separate role as Consumer Ombudsman. The Consumer Ombudsman role is focused on monitoring marketing activities and contractual matters related to consumers.
Alternative dispute resolution body (Consumer)
Consumer Disputes Board
The Consumer Disputes Board is the alternative dispute resolution (ADR) body for consumer matters in Finland. The board consists of independent experts offering a free-of-charge resolution alternative to court proceedings in matters related to all consumer goods and services.
Alternative dispute resolution body (Non-Household)
Energy Market Disputes Board
The Energy Market Disputes Board is an alternative dispute resolution body in matters between an energy company and a non-consumer end-customer, established in 2023. The board is governed by the Energy Market Disputes Board Act that came into force at the beginning of September 2023, which gave the mandate to provide resolution recommendations in the limited context of rights and responsibilities, as well as contractual matters defined in the Electricity Market Act.
Industry organization for electricity retailers
Finnish Energy
A special interest representing a wide range of companies in the energy sector in Finland, including energy producers, distributors, electricity retailers, and service providers.
Industry organization for electricity retailers
Kuluttajaliitto
Kuluttajaliitto is a general consumer association advocating for consumer rights and offering support services to consumers.

6.1.2 Regulatory framework

The legislation of the electricity markets in Finland is primarily derived from the EU legislation, which is implemented within the leeway given to member states. The latest changes in regulation have included implementing new EU legislation as well as the outcomes of the Finnish Smart Grid Working Group (2016–2018), led by the Ministry of Economic Affairs and Employment, which aimed to provide guidelines towards a national smart grid vision for 2025. For example, the latest package, approved in early 2023, included regulation updates and implementations related to enabling independent aggregators, clarifying DSOs’ rights to operate energy storage from the point of view of decoupling, electricity price comparison tools management and the Energy Market Disputes Board.

Retailer requirements

Retail electricity sales do not require a separate licence; as a result, formal barriers to entry do not exist. However, when starting operations, Finnish electricity retailers do need to organise their electricity procurement for the electricity to be sold, along with the balance settlement responsibilities and those to the centralised electricity data exchange, Datahub, thus creating some practical barriers to entry.
A retailer’s vertical integration with DSOs is regulated by law. The integration require­ments depend on the size of the DSO operations and include requirements for legal and management unbundling. Vertical integration is further discussed in Appendix A.
Suppliers are obliged to report contract prices for small customers to the Energy Authority, and these prices are made available on the Sahkonhinta.fi comparison tool. Changes to contract terms and prices must be updated with the Energy Authority before they are applied. In addition, electricity retailers report their annual sales records and other customer-related key figures to the authority.

Invoicing

Currently, most customers receive two invoices for their electricity consumption: one from the DSO and one from the electricity supplier. In some cases, the invoices may be combined if the DSO and supplier are owned by the same entity; however, the Ministry of Economic Affairs and Employment is seeking to enable a one-invoice model offered through the electricity supplier irrespective of the DSO.
 The minimum information to be presented in the supplier’s customer-facing electricity invoice is as follows:
  • Information on cost elements formulating the price
  • The units of consumption forming the basis for billing
  • For each cost element, the unit price and the sum to be paid
  • Total sum to be paid
  • Tax determination principle and total taxes to be paid.
In addition, contact details for customer complaints and dispute resolution must be given on the invoice. In October 2023, the Energy Authority updated the decree on invoicing information, focusing on the availability of consumption and price data to enhance customers’ understanding and capability to act. By June 2024, suppliers and DSOs must provide monthly invoicing data to the customer through the centralized Datahub service or through the company’s own portal. In addition, the Energy Authority is in the process of updating the decree to take into account further invoice information update requirements. Invoicing of electricity is typically based on post-payment based on meter readings; since June 2023, pre-payment is explicitly limited to mitigation of credit risks stemming from a weighty reason related to an individual customer.

Contracts

The Electricity Market Act of 1995 guarantees the right to make a so-called “obligation to deliver contracts” for electricity supply for small customers with a maximum of 3 x 63 A main fuse connection and up to 100,000 kWh of annual consumption. This is done by designating the retailer with the highest market share in each DSO’s network area as a designated or default supplier, which then needs to guarantee access to a fair price obligation to deliver contract. This “designated supplier” is required to make their prices and pricing mechanisms publicly available with the condition that the obligation to deliver contract cannot be a dynamic price contract. Obligation to deliver contracts generally cannot be terminated by the supplier.
Although obligation to deliver contracts were included in the Electricity Market Act of 1995, there has been no precedent for the definition of fair pricing within these contracts. As a result of this, along with the high electricity prices during the energy crisis, multiple Energy Authority investigations are ongoing related to pricing. The pricing of obligation to deliver contracts should be fair to the customer, but the retailer is not required to sell electricity at a loss.
In addition to obligation to deliver contracts, the Electricity Market Act includes protections for customers in case of a reason stemming from the electricity retailer according to the EU requirements for the supplier of last resort. Here, the DSO is responsible for supplying the consumer’s electricity for at least three weeks. In the event that the customer has not selected a new supplier after three weeks of receiving a notification from the DSO, the customer must be supplied until the Energy Authority transfers the customer to the supplier with obligation to deliver. In cases where the supplier stopping deliveries is the supplier with obligation to deliver, a new obligation to deliver supplier is assigned by the Energy Authority. Aside from regulations on obligation to deliver contracts, no specific regulations or obligations to offer certain types of contracts are in place.
Electricity market regulation in Finland does not include protections against energy poverty or for vulnerable household customers. These protections are instead governed by social policy. In addition, the Electricity Market Act includes some limitations on how non-payment situations are handled. These give additional payment time for households running into financial difficulty due to reasons such as serious illness or unemployment and restrict the supplier’s ability to disconnect supply due to non-payment during the winter months in a household reliant on electric heating.
The termination of an electricity contract, as set in the Electricity Market Act, allows non-fixed term and non-obligation to deliver contracts to be terminated by either party with a two-week notice period. The same notice period is applied to fixed-term consumer contracts longer than 24 months, once the first 24 months of the contract period have passed. A fixed-term contract is binding for both parties; however, consumers can usually terminate a fixed-price contract when they move if the Finnish General Terms of Electricity Sales are used in the contract. These terms are a common practice in the electricity retail market and are maintained by the Finnish Energy Industry in cooperation with other interest groups. They are typically used as reference terms in addition to the terms outlined in the contract between the supplier and the customer. Changes to pricing or the terms of an open-ended contract require a one-month notice period to consumers and a two-week notice period to non-residential customers. When contracting a new supplier, the new supplier terminates the contract on behalf of the customer, meaning that no separate termination of an old contract is necessary when switching. 

Marketing

The Consumer Protection Act outlines the general consumer protections for contracts between a consumer and a business. The Act contains many relevant protections related to the electricity retail market for consumers, including how electricity contracts can be marketed, or related to unfairness of contracts. Oversight of adherence to the Consumer Protection Act is one of the key responsibilities of the Consumer Ombudsman.
As electricity contracts are often made remotely, consumer protections related to telemarketing and remote sales are applied. One of the more important protections is the 14-day cancellation period in remote sales. In addition, since the beginning of 2023, a specific rule requires a separate confirmation of purchase after the phone call when sales are made via telemarketing. In addition, the requirements relate to information given before making a contract and for details to be given after making a purchase remotely.
Win-back strategies are allowed and commonly utilized in the Finnish retail market. The large demand for fixed-price contracts with fixed terms may also contribute to Finnish win-back activities, as many customers are periodically due to renew or switch their contracts.

SMEs’ customer rights

Commercial customers do not enjoy the abovementioned consumer protections. However, the electricity market-specific regulations applied to small businesses provide some additional protections compared to larger businesses. According to electricity market regulation, small customers are usually categorized as customers with annual consumption below 100,000 kWh and a maximum 3 x 63 A connection to the grid.

Sanctioning

The Energy Authority has a mandate to oversee conformance to legal requirements in the energy sector. In the retail electricity market, the Authority monitors the fulfilment of these legal requirements retrospectively and therefore does not monitor contractual matters between parties. The Authority can impose conditional fines for non-compliance, order compensation to parties in non-conformance situations, and suspend suppliers from the Sahkonhinta.fi comparison tool for misconduct related to pricing information.
The Consumer and Competition Authority also holds sanctioning powers related to consumer protection or competition infringements. In consumer protection matters, the Consumer Ombudsman’s primary tool is negotiation with businesses. However, it only has a limited mandate to impose bans on legally non-conforming activities and can raise issues to be decided in the Market Court. In competitive matters, the competition authority can impose penalties based on competition law.

6.1.3. Government response to the energy crisis

In August 2022, a working group was established by the Ministry of Finance to identify measures to minimize the potential effects of high electricity prices in the coming winter. The working group consisted of participants from the Ministry of Finance and the Ministry of Economic Affairs and Employment, and the target was to identify measures related to, for example, electricity markets, taxation, energy efficiency, or direct forms of support. The working group issued the following four statements in late August 2022:
  1. High electricity prices for household customers could be compensated by a temporary reduction of Value Added Tax, and
  2. by increasing the level of heating costs considered in the housing benefit determination.
  3. Information sharing should be utilized to decrease energy consumption.
  4. Finland should present an initiative to the European Commission to seek a moderate decrease in wholesale electricity prices in the EU.
In addition, several other measures were investigated, including other forms of taxation, direct forms of benefits, price ceilings in different markets, utilization of capacities in reserve power and connectors, and other energy efficiency activities.
The Finnish Government ultimately implemented several different measures for customers during the winter of 2022–2023 in response to high prices and price volatility in the electricity market. The following measures sought to ease the financial impact of increased electricity prices on private customers:
  • A VAT reduction from 24% to 10% for the energy component (5 months, Dec 2022 – April 2023)
  • Compensation through personal taxation (4 months, Jan 2023 – April 2023)
  • Electricity benefit (4 months, Jan 2023 – April 2023)
  • Compensation in billing through energy retailer (4 months, Nov 2022 – Feb 2023)
  • Electricity bill payment time extension (4 months, Jan 2023 – April 2023).
It is notable that Finland, other Nordic EU countries, and Ireland did not implement any interventions on price setting,
 while other EU member states and the UK did. In addition to consumer-facing measures, company-facing measures were implemented to stabilize their financial situation.

Value Added Tax reduction

The rate of Value Added Tax was decreased to 10% from 24% for the five-month period of 1.12.2022 to 30.4.2022 for the energy component of the bill.

Compensation through personal taxation

Those households whose electric energy costs exceeded 2,000 Euros during the four-month period from January to April 2023 were able to apply for a reduction in their personal taxation for 2023. The magnitude of the reduction amounted to 60% of costs exceeding 2,000 Euros, with the total upper limit for the reduction being 2,400 Euros. The deductible of the reduction is 100 Euros from the reduction sum. Compensation is managed by the Finnish Tax Authority.

Electricity benefit

The electricity benefit is directed to those households that were not able to obtain compensation through personal taxation in full due to low personal taxes. Those households whose taxes were less than the sum calculated based on the personal tax reduction sum were able to apply for an electricity cost benefit through the social security system (Social Insurance Institution of Finland, KELA). The application period for the benefit lasted until the end of 2023. A household receiving compensation through personal taxation is not eligible for the electricity benefit through the social security system.

Compensation in billing through energy retailer

The government imposed automatic compensation for the energy component of electricity bills for private households and housing cooperatives (limited liability housing companies) with a spot-price contract or a fixed-price contract exceeding 10 cents/kWh during the period November 2022 to February 2023. For households, the monthly compensation was 50% of the bill’s energy component exceeding 90 Euros, with a total upper limit of 700 Euros of compensation. For housing cooperatives, the compensation was limited to cooperatives with direct electric heating. Compensation was provided retroactively based on a separate act, which came into force in March 2023. Retroactive compensation was determined for November–December 2023 based on actual billing, while for January–February 2023, double compensation was paid based on January energy component costs. The government estimated the maximum total cost of the measure to be 400 million Euros.

Electricity bill payment time extension

Electricity retailers were obligated to extend the payment time for electricity bills for consumption during the January–April 2023 period. Consumers were entitled to an extension of up to 120 days of payment time without additional fees or interest accrual. In addition, businesses were entitled to an extension of up to 60 days, at an annual interest rate of 1.53% for the extended payment time.

Astetta alemmas – Campaign for energy savings

A campaign organised by Motiva, a government-owned company focusing on the promotion of sustainable development, the Prime Minister’s office, the Ministry of Economic Affairs and Employment, the Ministry of the Environment, and Sitra was launched in August 2022 in preparation for expected high energy prices over the coming winter. The campaign, “astetta alemmas” or “reduce temperature by a degree”, focused on enabling energy savings across Finnish households by means of knowledge-sharing on aspects such as energy consumption of different devices and encouraging energy-saving activities, such as reducing temperatures of heating appliances such as boilers and thermostats. The campaign was perceived to be successful, and significantly less electricity was consumed during the winter of 2022–2023 when compared to 2021–2022.

Company-facing government actions

In addition to customer-facing measures, the government also implemented activities to support the financial situation of electricity retailers. In September 2022, an up to 10 billion Euros debt and guarantee programme was launched for companies operating in the electricity forward markets to manage the increase in collateral requirements due to increased price volatility.
 However, in late November 2022, it was reported by a director in the Ministry of Finance that they had received no applications through the programme. 
As a separate package, the government organized a 2.35 billion Euros debt package through the government-owned company Solidium to stabilize the operations of the partly government-owned company Fortum. Solidium was able to collect interest and Fortum’s shares in return for the package.

6.2 Competitiveness and the functioning of the market

6.2.1 Competitive landscape

The number of electricity suppliers has been decreasing in Finland in recent years, mostly due to consolidations. From 2019 to 2022, the number of suppliers declined from 71 to 53. In 2022, there were six electricity retailers with a larger than 5% market share, as well as six electricity retailers with a number of customers exceeding 5% of total customers. The three largest suppliers covered 48% of all metering points in 2022. The total number of customers was 3,590,000, of which 417,000 were non-household customers.
In Finland, DSOs are required by law to be legally unbundled when a threshold of 200 GWh is met for more than three consecutive years. In total, there were 77 DSOs in Finland in 2022, of which 37 were required to be legally unbundled. In total, 54 were unbundled. In addition, 20 DSOs are required to have a separate management as they have 50,000 or more customers. However, only a relative few retailers remain unbundled from DSO operations from an ownership perspective.
Our survey results in Figure 6‑1 are in line with the 2022 data from the Energy Authority: the six largest electricity retailers in the survey exceeded 5% market share, with 14 retailers exceeding 1% market share (HHI = 1,200). The barriers to entry for suppliers are relatively low in the Finnish market, as new suppliers do not need to acquire a separate licence to start operating in retail sales. However, some practical barriers exist, such as organizing electricity procurement and balancing responsibilities. In addition to the consolidation of traditionally integrated suppliers, there have been some entrants with no background in integrated companies, who may seek competitive advantages through, for example, operational efficiencies enabled by no historic legacy; this edge may be enabled by a smaller organization size and reliance on digitalized services, or by differentiation through offering only renewable electricity supply.
Figure 6‑1: Market shares of the ten largest retailers (Finland)
Note: The market shares are estimated from a survey conducted amongst Finnish households in October and November of 2023. The shares are weighted. N=969.

6.2.2 Contracts and prices

Generally, in the Finnish retail electricity market, there have been three main types of contracts on which the price for energy component of electricity bills is determined:
  • Fixed-price contracts, with a fixed term of up to 24 months.
  • Variable-price contracts, or open-ended contracts, typically with a fixed price for a predetermined period. The price is usually periodically updated in advance, with a minimum one-month (consumers) or two-week (non-consumers) notice period. The pre-set price update interval is usually four times a year. These contracts can be terminated by the consumer with two weeks’ notice.
  • Spot-price contracts, based on the electricity spot market price plus the retailer’s marginal.
In addition to the energy component cost, it is common practice in all contract types that the supplier charges a monthly fixed fee of approximately 0 to 5 Euros.
Finnish end-customers have traditionally shown high demand for fixed-price price contracts: a share of 49–54% of all contracts issued between 2019 and 2022. Fixed-price contracts have tended to be followed by open-ended variable-price contracts, with a 36–40% share during the same period. Spot contracts have not been as popular in Finland as in other Nordic countries, with only a 8–14% share of contracts during the 2019–2022 period.6 As a result of the energy crisis, many companies also initiated a new hybrid contract type, consisting of a fixed component and a two-way dynamic component based on the spot price during the customer’s consumption.
According to our survey (Figure 6‑2), there was a significant uptake in spot contracts in 2023 compared to the 14% share at 2022 end figure by the Finnish Energy Authority, as 30% of the survey respondents reported having a spot contract in October–November 2023. At the same time, the share of variable-price contracts was low compared to the 2019–2022 figures: Only 14% reported having a variable price contract, indicating a shift from variable-price contracts to spot contracts at the start of the year. The share of fixed-price contracts has remained stable compared to the 2019–2022 level, as 49% of the respondents had fixed-price contracts. The uptake of alternative contract types, such as a consumption-effect contract, remains at a rather low level based on the survey at only 3%. Of the total respondents, 3% did not know which contract type they had.
According to the survey, a large majority (81%) of respondents indicated that they were able to find at least one contract that aligned with their needs and preferences, while 14% did not know if the available contract types met their needs. For those who did find at least one relevant contract, 25% found only one, 43% found two or three, and 13% found more than three.
Figure 6‑2: Contracts (Finland)
Note: The contract shares are those reported by respondents in a survey conducted amongst Finnish households in October and November of 2023. The shares are weighted. N=969.
The pricing of variable- and fixed-price contracts, as well as the electricity retailers’ marginals for spot contracts, were also surveyed. Figure 6‑3 shows the spot contract marginals for survey respondents with a spot contract. The largest group of respondents (37%) did not know their marginal, signalling that many consumers are not fully aware of this aspect; 27% had a marginal of between 0.4 and 0.599 cents, followed by 24% in the 0.2–0,399 cent range. In addition, some respondents had a marginal higher than 1 cent, which could indicate, for example, a spot contract from renewable sources, or an otherwise higher-than-usual marginal.
Figure 6‑3: Per kWh surcharge in spot price contracts (Finland)
Note: Surcharge per kWh for respondents with a spot price contract. In eurocents. Survey conducted in October and November of 2023 amongst Finnish households. N=291.
For October–November 2023, the survey indicates significantly higher prices in fixed-price contracts compared to pre-crisis levels (Figure 6‑4). While the majority had a fixed-price contract in the range of 5 to 9.99 cents, corresponding to the range of fixed-price contracts offered in early 2021 (Figure 6‑6), over 40% of respondents had a fixed-price contract for 10 cents or more, with the majority of these higher-price contracts being less than 15 cents (29%). Therefore, some customers have very high fixed-price contracts compared to the usual fixed price of around 10 to 12 cents offered in September 2023 (Figure 6‑6). This indicates that some customers are still left with very high electricity costs due to price volatility in the second half of 2022 and in early 2023.
Figure 6‑4: Per kWh price for fixed price contracts (Finland)
Note: Price per kWh for respondents with a fixed price contract. In eurocents. Survey conducted in October and November of 2023 amongst Finnish households. N=482.
Compared to fixed-price contract prices, the distribution of variable-price contract prices is rather similar based on the survey. That said, a significant share of 32% of variable-price contract customers were unable to tell their current pricing (Figure 6‑5). This could be due to the fact that in Finland, variable contract prices are often updated monthly or quarterly, leaving some customers in a position where they are unaware of the exact price they currently have. The survey gives a snapshot of prices in October–November 2023, heading into the autumn-winter period. The tendency of variable-price contracts to have lower prices during the summer and higher prices during the winter could have had an effect on their similar pricing to fixed-price contracts during the survey period; it is notable, however, that a consumer with a variable-price contract is able to switch suppliers with a 14-day notice, meaning that they could switch suppliers or contract type to a spot- or fixed-price contract at short notice.
Figure 6‑5: Per kWh price for variable price contracts (Finland)
Note: Price per kWh for respondents with a fixed price contract. In eurocents. Survey conducted in October and November of 2023 amongst Finnish households. N=482.

6.2.3 Impacts of the energy crisis on suppliers

The liquidity of the financial markets related to electricity suppliers has had a large impact on electricity retailers’ ability to offer fixed-price contracts, as retailers need to fix the price for the electricity to be provided to the customer for the duration of the contract. Due to the volatility of the prices, the collateral requirements for the financial markets’ participants have increased significantly and, at the same time, electricity retailers have seen liquidity in the financial markets decrease significantly. This has had a sizable effect on their capability to offer fixed-price contracts to customers, as well as on the pricing of their fixed-price contracts. The limited liquidity has raised the risk profiles of retailers and shifted some of the hedging activity from derivative exchanges to over-the-counter contracts. The increase of price volatility has also raised the importance of collateral management for companies operating in the financial markets.
In addition to fixed-price, fixed-term contracts, electricity retailers also hedge their positions on open-ended variable-price contracts. These contracts tend to have a two-week termination period, giving customers the opportunity to switch their contracts rather quickly. The electricity retailers have seen increased activity in switching between open-ended variable-price and spot contracts. As the retailer also needs to hedge their position on the open-ended variable-price contracts, increased switching behaviour has brought additional complexity to the forecasts they use as the basis for securing hedging from the financial markets.
The increased cost of hedging and collateral requirements, as well as other risks related to price volatility, have had an impact on the financial stability of suppliers. The impacts were more significant for some electricity retailers, with at least two Finnish retailers filing for bankruptcy in the autumn of 2022. One of these electricity retailers served approximately 20,000 and 70,000 customers, and the other served as an obligation to deliver supplier in two DSOs’ areas. However, other companies did not need to, for example, resort to the government emergency debt and guarantee package offered to companies operating in the derivatives markets.
In response to the energy crisis and the heightened attention on pricing as well as the energy sector in general, media coverage relating to energy retailers has also increased. As a result of this increased interest, and to increase knowledge and understanding of electricity pricing and contracts, electricity retailers have increased their PR and communications efforts both on a societal level and towards customers. The objective of these efforts has been to increase understanding of the retail electricity sector, including the role of retailers and pricing structures, as well as to better provide customer service to customers. For example, one of the topics gathering a lot of attention and requiring increased customer service efforts was fixed-price contracts at high prices during the autumn 2022 to early 2023 period. The discussion was focused on the fairness of pricing from the point of view of the customer, given that prices have since fallen significantly from their autumn 2022 peak. The need for communications efforts was also shown by increased demand for customer service due to different types of enquiries, to which electricity retailers have responded by increasing customer service capacity to relieve congestion in their customer service channels.

Availability of fixed-price contracts or contracts with fixed-price elements

As Finland has traditionally had a high share of fixed-price contracts, the energy crisis had a twofold impact on end-customers in the context of fixed-price contracts. First, the availability of fixed-price contracts dropped significantly as a result of the price volatility during the autumn of 2022, making it difficult for customers to secure fixed-price contracts at competitive prices. Second, some customers were able to maintain low electricity prices during the highest price period during 2022–2023 as result of having entered into up to 24-month fixed-term and fixed-price contracts, for example in late 2021, when 24-month fixed-price contracts were still offered at under 10 cents/kWh.
Figure 6‑6 Average price for 24-month Fixed Price Contract Offers for Type user K1 and L1 end-customers
Note: From August 2022 forward, the data is based on a low number of offers available to customers
As seen in Figure 6‑6, the average price of 24-month fixed price contracts was relatively stable in 2021. In contrast, prices started to rise in 2022, peaking sharply at around 40 cents/kWh in September 2022 when market uncertainty was at its highest. As a result, electricity retailers faced significant issues in acquiring hedging against the fixed-price contracts from the financial markets. Therefore, they either offered customers fixed-price contracts at very high prices compared to historical levels, or they were forced to pull fixed-price contract offerings from the market. Those customers whose fixed-price contracts ended during the period of highest uncertainty had only the options to switch to variable-price or other types of contracts, or to accept higher prices for new fixed-price contracts, if they were able to acquire these.
One of the results of the increased market disruption around fixed-price contracts was that hybrid consumption-effect contracts emerged as a contract type offered by many suppliers. From the energy system standpoint, these contracts also support the aim of increasing demand-side flexibility. They generally contain a fixed base-price per kWh component and a two-way consumption-effect component, usually calculated based on the average spot price of the consumption, which is subtracted by the average spot price of the month. The fixed component and consumption-effect component are then summed to give the billing price for electricity for the month. As these contract types also contain a fixed component, they are also hedged by the retailer and are therefore not isolated from the requirements for liquidity in the financial markets. However, such contracts can lower the retailer’s risks when compared to fully fixed-price contracts.
As part of the updates to the Electricity Market Act in June 2023, an addition was made to contract type requirements for obligation to deliver contracts. It was defined that the only type of obligation to deliver contract offered by the obligation to deliver supplier could not be a spot-price contract, meaning that there needed to be some type of fixed-price contract offering available to all small customers. In June 2023, 16 Energy Authority investigations were ongoing in relation to obligation to deliver supplier matters. In one of the decisions, given the same month, the Authority found that one of the largest retailers in Finland was non-compliant when it offered variable-price spot contracts as the only obligation to deliver contract type from September 2023 onwards.
 In addition, in at least seven of the other investigations, the matter of spot-price contracts as the only obligation to deliver contract type offered was under scrutiny.

6.3 Customer awareness and satisfaction

For households in Finland, the most important source of heating is district heating, and the second most important is electricity. District heating is the most important source of heating for around 45% of households, and electricity for approximately 25% (Figure 6‑7). Approximately 25% of households do not know their electricity consumption per year, while around 30% say that they use less than 5,000 kWh annually (Figure 6‑8). 
Figure 6‑7: Most important source of heating (Finland)
Note: The graph shows the most important source of heating in the household. Survey conducted in October and November 2023 amongst Finnish households. N=1156.
Figure 6‑8: Household electricity consumption per year (Finland)
Note: The graph the reported yearly electricity consumption. Survey conducted in October and November 2023 amongst Finnish households. N=969.

6.3.1 Awareness during search and switching

Overall, during the period of high price volatility, the customers had an increased incentive to gain further understanding of the electricity retail market and to shop around for a better contract. The common view is that the overall awareness of customers was raised as a consequence. However, the retail electricity market and electricity as a product remain a complex topic in Finland, as seen by evidence from the survey and interviews conducted in this study.
Compared to other Nordic countries, Finland had a relatively high share of active customers, as indicated by the 80% share of respondents who had either switched or compared contracts within the last year (Figure 6‑9). The overall share of respondents who had signed a new contract within the last 12 months was 61% in Finland, indicating a rather high level of activity in the market compared to other Nordic countries. One reason for this could be the high proportion of fixed-price contracts causing added natural switching compared to contract types without a fixed term. Of these new contracts, 51% were with a new supplier. Finnish suppliers also took part in win-back sales activities during the past year: 34% of respondents who had entered a new contract with another supplier were contacted by the previous supplier. However, suppliers’ win-back proposals were largely not seen as attractive, with only 16% accepting the win-back proposal.
Figure 6‑9: Share of consumers active in the electricity market last 12 months (Finland)
Note: The graph shows the share of respondents who have either switched or compared electricity contracts during the previous 12 months. Survey conducted in October and November of 2023 amongst Finnish households. N=969.
Figure 6‑10 shows that the largest challenge for customers during switching is to compare different contracts and terms (21%), leaving room for improvement in both the electricity retailers’ information provision and awareness raising on the consumer side. This is supported by the 17% and 9% of respondents who found it difficult to differentiate between contracts and to understand the terms and conditions, respectively. In addition, some respondents found it hard to find information or relevant contracts of sellers. However, the difficulty stemming from the actions of the current provider were not seen as a major challenge, as only a 2% share in responses indicated this issue.
Figure 6‑10: Challenges in switching or comparing contracts (Finland)
Note: The graph shows the percentage of respondents who have recently switched or compared contracts that experienced challenges when doing so. Multiple choices were allowed. Survey conducted in October and November 2023 amongst Finnish households. N=593.
The awareness of customers when making a decision during comparison or switching was also studied (Figure 6‑11). Two-thirds of the respondents found that they were either well or very well informed, indicating that a large share of customers had a good basis on which to make a decision. However, 6% of customers felt poorly informed to make a decision. The effects of price volatility and media coverage of the energy markets may have had an effect on customers’ awareness in a decision-making situation; however, this statement would need support from previous study results to draw further conclusions.
Figure 6‑11: How informed respondents felt when switching or comparing contracts (Finland)
Note: The graph shows how well-informed respondents who have recently switched or compared contracts felt. Survey conducted in October and November of 2023 amongst Finnish households. N=772.
Of those respondents who had compared contracts, 23% ended up not switching. The most common reason (at 44%) was that there was too little to save from switching, as seen in Figure 6‑12. In addition, a further 9% found that the risks of switching overweighed the potential savings. Together, these findings indicate that economic reasons were the most significant. In contrast, only a small proportion (6%) found switching too complicated or time-consuming, while only 8% were unable to find information or to compare contracts.
Figure 6‑12: Reason for not switching after comparing contracts (Finland)
Note: The graph shows why those who have compared but not switched contract, ultimately chose not to switch. Survey conducted in October and November of 2023 amongst Finnish households. N=179.
Satisfaction with current contract was seen as the most common reason to not compare or switch contracts, as half of those customers who had not compared or switched contracts in the last two years reported that they were satisfied with their current contract (Figure 6‑13). Potential savings or the perception of low potential savings were presented as reasons by 14% of respondents; this could derive, for example, from low electricity consumption overall. However, 16% found that their electricity contract was not important to them. The issues of finding information (5%) or the complicated or time-consuming nature of switching or comparing contracts (20%) were also quite common.
Figure 6‑13: Reason for not switching or comparing contracts more often or at all (Finland. Multiple choices allowed)
Note: The graph shows why those who have not compared or switched contracts within the last 13 months, have not done so more often. Survey conducted in October and November of 2023 amongst Finnish households. N=181.
Of those respondents who had signed a new contract in the past 12 months, approximately one fifth had done so because of moving (Figure 6‑14). Other common reasons were being prompted by contact from the retailer’s representative (29%), while one fifth had actively looked for a new contract. A rather large share of new contracts was signed for other reasons than the previous three options (at 28%).
Figure 6‑14: Context for switching contract (Finland)
Note: The graph shows the context for having switched contract. Survey conducted in October and November of 2023 amongst Finnish households. N=593.
Customer motivation for switching contract was often a better price at 39%, while negative experiences with the existing supplier or access to new services were not often a reason for switching (Figure 6‑15). Other reasons accounted for the majority of responses, which could include moving or coming to the end of a fixed-price contract period.
Figure 6‑15: Main motivation for switching (Finland)
Note: The graph shows the respondents main motivation for having switched contract. Asked to those who reported having switched contracts within last 12 months. Survey conducted in October and November of 2023 amongst Finnish households. N=593.
The primary source of information among Finnish customers who switched or simply compared contracts was internet-based (Figure 6‑16). Approximately one third of respondents who switched found online price comparison tools to be the most important source of information, with other internet sources almost equally represented in the answers. The respondents who had switched contract were not likely to do so based on a recommendation, only slightly more than one fifth of respondents listed recommendations as most important. There is a large disparity in the importance of other sources between those who had switched (23%) and those who had only compared (4%), which could indicate that the information was received from a supplier representative, which was not covered in the survey.
Figure 6‑16: Most important source of information when switching or comparing contracts (Finland)
Note: The graph shows the most important source of information the last time the respondent switched or compared contracts. Survey conducted in October and November of 2023 amongst Finnish households. Switched contracts: N=359. Compared contracts: N=179.

6.3.2 Customer awareness and demand for different contracts

The heightened media focus as well as the incentive created by high price volatility is seen to have affected customer awareness in Finland. As Finland has generally had a high share of fixed-price and variable-price contracts, Finnish customers have preferred more stable contracts over dynamic spot prices. The shift from variable contracts to spot contracts (as shown in Figure 6‑2) indicates that some changes in preferences have been seen, as customers have switched contracts. Spot contracts are generally seen as a contract type that is more suitable for customers with more awareness as well as capability for demand flexibility, which could indicate that some customers are now more familiar with spot contracts.
The price volatility in 2022–2023 also resulted in the new type of hybrid contract with a consumption effect. However, this type has not yet been contracted by a large share of customers based on the survey. This type of contract, however, increases the demand for understanding of the electricity market, contract terms, and pricing structures. The current contracts generally have a similar price structure based on a fixed component per kWh and a two-way adjustment based on the spot-price average during consumption. These contracts generally have the same pricing structures between different suppliers; however, a new contract type always requires increased awareness and understanding on the part of the customer.

6.3.4 Invoicing and billing

The majority of Finnish customers receive their bills in electronic format, such as via e-invoice or email, with three quarters of survey responses in October–November 2023 (Figure 6‑17). Subscription-based services such as electricity have an incentive over transaction-based services or products for the customer to move to direct online bank e-invoicing to avoid recurring manual invoice payments. However, 22% of respondents still received their invoices in paper format through physical mail, which is high compared to other Nordic countries.
Figure 6‑17: How electricity bill is received (Finland)
Note: The graph shows how respondents receive the bill from their electricity supplier. Survey conducted in October and November of 2023 amongst Finnish households. N=969.
The survey found that relatively few Finnish customers familiarize themselves with the other information contained in their electricity invoices in addition to the amount to be paid (Figure 6‑18), indicating somewhat low interest or understanding around the details of the invoice. The amount to be paid is read by 84% of customers; when they do read the other information provided, they most often check the cost breakdown (42%), historical or estimated consumption data (39%), or information on changes affecting price (13%).
Figure 6‑18: What information respondents read on their invoice (Finland. Multiple choices allowed)
Note: The graph shows the fraction of respondents that report looking for each type of information on their bill. Multiple choices allowed. Survey conducted in October and November of 2023 amongst Finnish households. N=969.
Finnish customers mostly prefer email (67%) or separate letter (51%) notifications related to their contract (Figure 6‑19). Among other digital ways to notify customers, apps or “My Account” online services are not as popular as SMS (23%) or email notifications. More formal ways of communication are more popular; customers seem to prefer to make sure that they receive the information about any changes, as apps or online services may not be used as often. This may also indicate a low take-up of app or “My Account” type services in Finland, as other surveyed countries show more interest in receiving contract and price information via these add-on services.
Figure 6‑19: Preferred method of being notified of changes to the electricity contract or other aspects that may affect the customer (Finland. Multiple choices allowed)
Note: The graph shows the methods by which respondents prefer to be notified of changes by the electricity seller that may affect the customer, for example changes to the electricity contract. Survey conducted in October and November of 2023 amongst Finnish households. N=969.

6.3.5 Customer satisfaction

During mid 2022 to early 2023, the energy sector received a large amount of media attention and public interest due to the implications faced by households and companies. This may have had an effect on the overall image of the sector, as well as levels of customer satisfaction. The survey showed that 60% of all respondents in Finland had had no negative experiences with their electricity suppliers, while the remaining share had had different types of negative experiences, as shown in Figure 6‑20. The most common reason for a negative experience was much higher than expected prices, with 14% of all respondents having experienced this, followed by 10% of respondents who had difficulties reaching the supplier’s customer service channels, potentially due to increased demand.
Approximately 40% of respondents reported having negative experiences with the retail supplier, and 30% reported negative experiences not related to pricing. Respondents also expressed negative experiences related to information, agreed contract terms or pricing received from the supplier. One in 20 of all respondents had negative experiences related to being misinformed by the supplier or by the information received. In addition to being misinformed, 6% had experienced different contract terms than they were expecting, and 6% had experienced higher prices than agreed. These negative experiences could either derive from the supplier side, whether intentionally or not, or the consumer’s limited understanding of agreed terms or pricing. 
Figure 6‑20: Negative experiences with electricity seller (Finland. Multiple choices allowed)
Note: The graph shows the fraction of respondents that reports a negative experience with their electricity provider during the last two years. Multiple choices allowed. Survey conducted in October and November of 2023 amongst Finnish households. N=969.
In response to negative experiences, 39% of respondents did not do anything (Figure 6‑21). However, a significant share of 26% switched suppliers as a result, showing that customers can react strongly to negative experiences. Some respondents who remained with the same supplier signed a new contract (9%), while many did issue a complaint with the supplier (26%). Some customers (4%) had also complained to the authorities as a result of their negative experiences.
Figure 6‑21: Consumers’ response to a negative experience (Finland. Multiple choices allowed)
Note: The graph shows action taken by consumer in response to a negative experience. Survey conducted in October and November of 2023 amongst Finnish households. N=433.

6.3.6 Impacts of energy crisis on customers

The overall rise of energy prices had a large impact on customers overall, but this impact had high variance based on aspects such as contract type, timing of signing last contract, type of housing, and type of heating. In a survey conducted in the summer of 2023, 45% of households voiced that their financial situation had degraded significantly or rather significantly due to electricity prices at their permanent residence, while 42% of detached-house households had pursued savings in heating or cooling (as opposed to only 11% in apartment building households).
Due to the large proportion of fixed-price contracts in Finland, a group of customers entered into 24-month fixed-price contracts before the period of price volatility. This put different customers into very different positions. For example, a detached house with electric heating could have faced an almost 10-fold increase in the price of the energy component if they wanted to sign a new fixed-price contract during the peak prices of up to 40 cents/kWh in autumn 2023, while their neighbours may have retained a fixed-price contract as low as 5 cents/kWh over the highest price peak in autumn 2022 to early 2023, as seen in Figure 6‑6. In addition to those having to renew their fixed-price contracts, customers with an open-ended variable-price contract or a dynamic-price spot contract were faced with a sharp increase in electricity prices.
As a result of increased prices, many customers increased their understanding of electricity markets, contractual terms, and energy efficiency activities to save on their electricity costs. In turn, those customers interested in following market prices and having the capability to adjust their consumption may have opted for a spot contract to benefit from shifting consumption to times of lower pricing. Others, who for example prioritize stability or are not inclined to follow market prices, could have opted for contracts with a fixed component, such as fixed-price or open-ended variable-price contracts. The share of spot-price contracts saw an increase from 9% to 14% in 2022
 and a further increase to 30% by October–November 2023 at the time of our survey (Figure 6‑2). This could indicate a shift towards spot-price contracts due to changes in contract preferences.
The increased price volatility also saw an increase in demand flexibility activities, as the incentive to save energy was high. The Energy Authority estimated a 5.4–7.4% temperature-adjusted reduction in electricity demand between September and December 2022 compared to the 2017–2021 averages.
 In addition, consumers were able to receive temporary financial assistance through VAT reduction, compensations and benefits. In April 2022, it was estimated by the Energy Authority that the cost of these measures would total 480 million Euros.
Due to disputes deriving from increased prices, the Consumer Disputes Board announced two different recommendations during 2023. The first, given in June, saw that the increase in price for open-ended variable-price contracts was unfair if it resulted in a relative increase of 15% and at least 150 Euros annually. The second saw fixed-price contracts with a fixed term as unfair if the average price of similar contracts was over 15% less during the validity of the contracts. Both statements were based on the consumer protection legislation: The supplier’s reasons behind the price increases of necessary commodities did not justify unfair increases to consumer prices. In their recommendations, the Board cited pricing-related precedents on other necessary commodities, such as distribution service and housing rental pricing increases. However, two of the nine members of the Board saw that the energy component of energy bills was inherently a different type of necessary commodity, and therefore the unfairness of pricing could not be based on the same precedent.
 The suppliers have generally not followed the given recommendation, citing that the recommendations are unfeasible for them from the perspective of how the electricity retail market operates.
 The Board’s approach to recommendations on fairness of pricing was somewhat different to the Energy Authority’s decision on fairness of pricing of obligation to deliver contracts given in June 2023, which was based on the Electricity Market Act’s obligation to deliver supplier regulation and did not outline any quantitative limits to fairness of pricing.
 It is notable that the Energy Authority decision covers the obligation to deliver contracts based on the Electricity Market Act, while the decision from the Consumer Disputes Board approaches the matter from the viewpoint of consumer protection regulation.
As suppliers made changes to their contract offerings due to price volatility, consumers needed to adjust to different types of contracts and contract terms. The new types of contract offerings, predominantly those containing a consumption-effect component, give the customer an opportunity to affect the price of the energy component while at the same time retaining some degree of certainty through the fixed-price component. While the offer of these contracts becoming commonplace was a positive change from the customer’s point of view, there were also changes to the terms of existing contract types. There is an indication that the termination clauses of fixed-term contracts have become stricter from the customer perspective. For example, contract penalties may have increased, or termination clauses may have been deleted altogether. In September 2023, the Consumer Disputes Board gave their recommendation that fixed-term contract termination by the consumer based on fairness of pricing should be treated under the Consumer Protection Act. The Board stated that excessive pricing of over 60% compared to average contracts offered during the validity of the contract, and leading to over 600 Euros of annual costs, would give the consumer a right to terminate the contract without penalty.
During the energy crisis, the customer service channels of many electricity suppliers were constrained to the point that consumers were at times unable to contact customer service. Therefore, there were some limitations to the ability of consumers to exercise their legal rights, such as cancelling rights concerning distance selling or to submit a complaint. In their June 2023 decision, the Consumer Ombudsman found one of the larger suppliers to be non-compliant with the customer support requirements in the Consumer Protection Act. The Ombudsman noted that customers were limited in their capacity to exercise their legal rights due to congestion in the suppliers’ call channel. The supplier subsequently committed to ensuring access by customers to their customer service channels as required by the Consumer Ombudsman.
Compared to pre-crisis levels, the importance of receiving information related to pricing and contractual terms is also highlighted by the increase in energy costs to customers. In June 2023, the Finnish implementation of EU regulation on comparison tools for electricity prices came into force. The regulation established the Energy Authority as the party responsible for running the official sahkonhinta.fi comparison tool. In the past, there have been indications of misleading information and unsupported promises on other price comparison tools.
 Similarly, the comparability of prices between different contract prices is sometimes low, as the price information of spot-price contracts is often based on an estimate of average spot prices given by the supplier, whereas the actual price will be based on the spot prices during consumption. However, for the individual consumer, it is not always easy to understand the actual price formation of the different contracts and the resulting prices. In addition to price comparison tools, the importance of a spot-price consumer receiving coupled consumption and price information data is also a key enabler of customer cost management.

6.4 Åland

6.4.1 Regulatory framework and organization of the market

Åland is an autonomous region of Finland, in which the government of Åland (Landskapsregering) answers to the parliament of Åland (Lagting). Åland has been granted extensive autonomy, which extends to the energy sector. While the regulatory framework for the electricity market is mostly based on the Finnish regulation, the region has several exceptions and can, due to its status as an autonomous region, decide on its own electricity market laws and other regulatory frameworks. These laws form part of the ÅFS (Ålands Författningssamling) decided by the Lagting and other regulatory frameworks (part of the Ålex) that are decided by Åland’s government. A pervasive difference is that the region’s energy authority or actors are given the responsibility instead of the nation’s authorities or actors. In ÅFS 2015:13 (Landskapslag om Ålands Energimyndighet), the Energy Authority in Åland (Ålands Energimyndihget) is given the authority to supervise and monitor the electricity market.  

Relevant authorities and actors

In addition to Åland’s own national regulatory authority and electricity market legislation, the transmission network in Åland is operated by an independent TSO, Kraftnät Åland. Åland also has its own agencies and bodies covering consumer matters in the region.
Role 
Name 
Description
Regulatory authority 
Ålands Energimyndighet
The national regulatory authority of Åland oversees the energy market in Åland.
Consumer authority and competition authority 
Statens Ämbetsverk på Åland
 
 
Consumer and competition matters in Åland are supervised by the General Government Agency of Åland.
 
Ombudssmyndigheten
Åland has its own ombudsman, ombuds­manmyndighet. The ombudsman supports consumers through advice and activities to secure customer interests.
Alternative dispute resolution body 
Konsumettvistenämnden
Consumer Dispute Board
The Consumer Disputes Board is the ADR body in Åland. The Government of Åland nominates the members of the board.
Industry organization for electricity retailers 
N/A
Suppliers can be members of Finnish industry organisations.
Transmission system operator
Kraftnät Åland
Åland’s independent TSO handling transmission system and balancing services in Åland.

Regulatory framework

Legislation in Åland is based on the national Finnish framework, with some exceptions. Some of these exceptions are more linked to transmission and distribution of electricity (e.g., voltage, permissions) and will not be included in this report. Other exceptions that are related to electricity law and part of the ÅFS (Ålands Författningssamling), and which have an impact on the electricity market, can be summarized as follows: 
    • Unbundled energy companies – The provisions on the separation of actors for distribution systems in electricity companies are not applicable to electricity companies in the region.
    • Local balance responsibility – Regarding nationwide balance responsibility and settlement, the system operator in the region is responsible for ensuring that the region’s electrical system is technically functional and reliable. Additionally, they handle tasks related to regional balance responsibility and flat-rate settlement.
    • The transmission network owner is allowed to charge a separate transmission fee for the import and export of electricity to and from its network.
    • The TSO and the transmission network owner in the region are responsible for monitoring the development of standards for message traffic and procedures for information exchange in relevant aspects.
    • Balance settlement applies in the region - the net consumer’s consumption should be calculated based on measurement or based on measurement and flat-rate settlement.
    • The regional government grants permission to engage in network operations.
    • Flat-rate settlement as a method in balance settlement and procedures for fixed and open electricity supply is described (fixed = a certain amount determined per hour; open = all the electricity the customer needs + balance); today, hourly settlement is used.
    • The right to administrative tasks assigned to state authorities according to national law shall be managed by the regional government, to the extent that the administration relates to tasks within the region’s legislative authority. 
    • Application of the law on energy efficiency services for companies in the electricity market is managed by the Energy Authority in Åland according to law 2015:103 rather than the Finnish National Energy Market Authority.
    Åland also implements many lesser regulations, such as decrees given by Finnish authorities on energy markets. The decrees implemented include those on invoicing information, on measurement and settlement of electricity delivery, and 10 other regulations. These regulations are set to come into force automatically on the same schedule as in mainland Finland through a decree given by Åland’s government (2015:108).
    While there are some differences in the legislation related to energy markets, the general consumer protections in Åland follow the same format as the Finnish legislation, including authority setup and interpretation on how the laws are applied. These consumer protections are also monitored locally by the authorities in Åland.

    Retailer requirements

    In Åland, as in the rest of Finland, retail electricity sales do not require a separate licence. The retailer organisation can be vertically integrated with the DSO, which both the electricity retailers in Åland are. The companies need to have separate accounting for the DSO part and for the retailer part. Suppliers are obligated to publish their prices on their websites and must also inform consumers about the government website providing links to other electricity supply entities. Suppliers also inform the local government about conditions and pricing.
    The market in Åland is not connected to the Finnish electricity market data exchange, Datahub. Instead, Åland’s TSO has their own data system with all connection points and customers. The retailer does not have to be able to use EDIEl traffic for exchange of information given that the TSO is not using it; rather, information is exchanged with either developed APIs or via email.
    Retailers follow the General Terms of Electricity Sales and Supply in Åland (EFV2017, EFV2017), which are an adaptation of the Finnish general terms of electricity sales and supply. Updates and changes to the local general terms are led by the DSO in collaboration with the local actors in Åland.

    Invoicing

    The regulatory principles on the invoicing of electricity sales in Åland follow those in place in Finland, as Åland adopts the Finnish Energy Authority’s decree on information required in the invoicing of electricity. In Åland, it is more common to have an integrated supplier DSO, and many customers therefore receive invoices covering both electricity supply and DSO billing. Similar to Finland, combined billing is not a requirement in Åland, meaning that some customers with a different electricity supplier and DSO receive two invoices. Since only a few customers have a separate supplier and a separate DSO, the retailers do not want to develop functionality in their systems to be able to combine electricity supply with grid fees from the other DSO in the future.
    Similar to Finland, the legislation and the general terms of electricity sales in Åland give retailers the right to potentially obtain reasonable security or prepayments from consumers before the contract is signed, if there are compelling grounds. The possibility of doing so after the contract is signed is more limited.

    Contracts

    The legal framework for electricity supply contracts is the same in Åland as in the rest of Finland, including supplier notice periods, contract termination principles, and the obligation to deliver rules stemming from the Finnish Electricity Market Act. Similarly, the General Terms of Electricity Sales and Supply in Åland are mostly based on the general terms of electricity supply in Finland. However, there can be some variation on these terms, as they are adapted to the local market environment in Åland based on how national laws are applied in the region.

    Marketing

    The legal framework for consumer protection follows the same regulation as the rest of Finland. Åland has its own authority for competition and customer rights (Statens Ämbetsverk på Åland), as well as an ombudsman promoting consumer rights (Ålands ombudsmansmyndighet) that handles customer protection matters locally.

    SMEs’ customer rights

    Commercial customers do not enjoy consumer protections in Åland or in Finland. However, the electricity market-specific regulations applied to small customers with less than 3 x 63 A main fuse connections and up to 100,000 kWh of annual consumption provide some additional protections compared to larger businesses, the regulatory frameworks for which are the same in Åland as in the rest of Finland.

    Sanctioning

    In Åland, the local energy authority has a similar mandate to oversee conformance to legal requirements in the energy sector as the Finnish Energy Authority has in the rest of Finland. The local consumer and competition authorities also hold sanctioning powers related to consumer protection or competition infringements.

    Government response to the energy crisis

    Åland’s autonomy gave the local government leeway to decide on whether some of the schemes implemented in Finland would also be made available in Finland. Like in Finland, a temporary VAT reduction on the energy component of electricity bills (from 24% to 10%) was applied in Åland for five months during the winter of 2022–2023. In addition, the interlinked schemes to provide support amid high electricity prices via deductions in personal taxation or through social security benefits were made available in Åland. However, Åland did not implement the automatic compensation scheme through supplier billing for high energy component costs, which was also in place to cover half of the costs over 10 cents/kWh for spot- or fixed-price customers in Finland over a four-month period during the winter of 2022–2023. The latter scheme was adopted under the administration of the Finnish ministry responsible for energy, while other schemes were administered by other ministries.
    In addition to financial schemes, Åland ran its own energy-saving campaign complementing the national campaign launched in Finland. The local campaign was organized by Smart Energy Åland in cooperation with local energy sector actors and the government.
    To provide support for the increased capital demands of electricity suppliers in the autumn of 2022 caused by price volatility and liquidity issued in financial markets, the Åland government started to prepare a bank guarantee scheme. However, the suppliers in Åland did not utilize this scheme and instead used other types of options to cover their funding through the period of price volatility.

    6.4.2 Competitiveness and functioning of the market

    Competitive landscape

    Due to the regional framework, there are some entry barriers for suppliers seeking to act in the electricity market in Åland. The “Landskapslag (1996:47) om rätt att utöva näring” establishes the criteria for a company to operate in Åland, including requirements on how the company must be connected to Åland. Furthermore, the supplier must use a local balance responsible partner; there are currently four companies with balance responsibility towards Åland’s TSO. Of the four, two operate as retail suppliers in Åland. In addition to the requirements on setting up a supplier company in Åland, the fact that the legal framework is based on the Finnish regulation while the price area belongs to Sweden SE3 makes it harder for electricity retailers from either Finland or Sweden to enter the market. No licences are required to set up supplier operations in Åland. If a local actor wishes to go into the energy business, the interviews with some of the actors indicate that it is rather easy to start a retail company, while some focused more on the entry barriers mentioned above and the limitations of the market size. According to the interviews, gaining permission from the local government (Ålands landskapsregering) to set up a company operating in Åland was seen as a smooth process; in contrast, the interviewees saw the market size in Åland as the likeliest hindrance, as small markets can be viewed as less attractive for potential new entrants.
    The current competition landscape is based on two integrated electricity retail supplier DSOs operating in the Åland market. Until the spring of 2023, a balance provider and wind park operator also operated as a third supplier option in Åland, with customers mainly in larger consumers and company segments. According to the interviews, there are approximately 32,000 customers in Åland; approximately one third live in the grid area for one of the suppliers, and the remainder are in the grid area for the second supplier. According to the interviews, only a handful of customers have changed suppliers, indicating almost full correlation between a customer’s electricity supplier and their DSO.
    Company ownership also has an impact on how they act in the market. The two suppliers in Åland are either owned by the municipality or operate as an economic cooperative owned by their customers, which can mean that the companies may focus less on financial targets and more on giving customers a stable and reliable electricity supply. Neither company seems to actively try to gain customers from the other; for example, one offers fixed-price contracts only to customers located in their DSO area. In the interviews, the suppliers mentioned that they also have limitations on how customers can change contract types. For example, one of the suppliers has a limitation on moving from an open-ended tariff-based variable-price contract to a spot contract whereby the customer must stay on a spot contract for one year before switching back to tariff-based contracts. This limitation is in place so that customers cannot use spot-price contracts during summertime and tariff-based contracts during wintertime, which would increase the supplier’s risk exposure. Overall, even if there are all possibilities for the market to function, in practice, there is very little competition in the market, and it is very similar to the market function in Finland and Sweden prior to deregulation (Finland 1995, Sweden 1996).

    Contracts and prices

    According to the legislation proposal 28/2022-2023 from May 2023, electricity retailers with significant market influence must publish their prices to consumers and SMEs free of charge and make it possible for consumers to compare offerings. This change stems from the EU legislation on the required implementation of electricity comparison tools. Retailers must also inform consumers that links to other electricity supply entities are provided on the Åland government website.
    Both suppliers offer similar contract types, which are published on each company’s website. They generally offer two contract types: a variation on tariff-based prices that are open-ended (similar to Finnish variable-price contracts), and dynamic-price spot contracts. In the open-ended tariff-based contract, the price is fixed for an open-ended period, which is then updated with a notice period of one month several times a year. These contracts often have a price variation between peak time and non-peak time, such as separate daytime and nighttime tariffs. One of the suppliers in Åland has over 90% of customers on contracts based on these open-ended tariff contracts. The suppliers also offer spot-price contracts, which are mainly favoured by businesses. Since the supplier companies are also DSOs, the electricity supply and distribution prices are usually shown together on the price lists.
    The other supplier operates as a business cooperative owned by its customers and only offers tariff-based variable-price contracts to customers who are located in the same DSO area. This means that the customers of the second supplier have only one contract option with a fixed-price element. Generally, there seems to be rather limited marketing activity in the retail electricity market in Åland, as neither supplier is actively gaining new customers, also resulting in little to no win-back activity.
    Åland’s TSO publishes both suppliers’ open-ended contract prices along with SE3 and FI market area spot prices on their website. This tool can be used by the consumer to compare historical prices. During the June 2022 – May 2023 period, the two suppliers’ open-ended contract prices were, on average, 25% below the average monthly spot prices in the SE3 price area.
    Impacts of energy crisis on suppliers
    The financial and liquidity effects on suppliers operating in Åland were similar to other Nordic countries, as price volatility and liquidity issues raised the costs of hedging and increased collateral demand. The suppliers continued to offer their tariff-based variable-price contracts to their customers throughout the price volatility. In addition to the two largest suppliers, a smaller supplier provided spot-price dynamic contracts to customers in Åland; however, the supplier stopped offering retail contracts in early 2023, citing a decision made earlier based on the business environment for a small supplier and the decision to focus on their main business operations.

    Availability of fixed-price contracts, or contracts with fixed-price elements

    While the main suppliers in Åland continued to offer their open-ended variable-price contracts and spot contracts through the price volatility, other types of fixed-price contracts, such as the fixed-price and fixed-term contracts popular in mainland Finland, were not made available to customers during the crisis and as of late 2023. The suppliers have also placed some restrictions on switching between contract types, limiting switching activity between contract types within the same supplier, which have generally been open-ended for two weeks on the customer side. In practice, this limits the timing of contract types seasonally by, for example, having spot contracts during the summer and open-ended fixed-price contracts during the winter; this can create a lock-in into a type of contract that is usually offered as open-ended. During the crisis, the suppliers witnessed increased interest from some customers wishing to optimize the differences in contract prices using spot-price contracts during summer and variable-price contracts during winter. In the interviews, the suppliers mentioned some considerations over bringing further contract types to the market.

    6.4.3 Customer behaviour

    While customers in Åland were not surveyed for this study, the interviewed stakeholders reported no significant increase in customer complaints or congestion of customer service channels, and very few cases have been submitted to the consumer and competition authorities regarding the region’s electricity market. One supplier reported having conducted their first customer survey following the principles for CSI (customer satisfaction index) during 2023, but trends on the development of customer satisfaction over time are not available.
    As Åland is a limited market area with only a few suppliers, a high correlation between a customer’s DSO and supplier, and a more limited selection of contract options, there are also differences in aspects of customer behaviour compared to larger market areas in the Nordic countries. Regarding customers’ contract preferences during and after the price volatility in the past two years, there has been no indication of a larger shift in contract type preference from variable-price open-ended contracts to dynamic spot contracts based on the interviews. In Åland, less switching between contract types or suppliers could be attributed to many reasons, such as the correlation between the local DSO and the electricity supplier, or not having fixed-price and fixed-term contracts, which cause natural periodic switching when contracts end. In the interviews, it was noted that some customers may not be aware of the options to switch suppliers or how to compare contracts. It was also highlighted that customers are very loyal to their suppliers and that the supplier’s capacity to offer stable prices over time is a source of high trust among their customers.
    Nordic Energy Research I www.norden.org/publications I pub@norden.org