Go to content


Reykjavik, Iceland. Photo: iStock / Palmi Gudmundsson

7. Iceland

7.1 Regulatory framework and organization of the market

7.1.1 Relevant authorities and actors

Several authorities have a role in regulating and overseeing the retail market for electricity in Iceland; they are presented alongside the relevant regulations they manage in Table 7‑1.
Table 7‑1: Actors and relevant regulations
Regulatory authority
Operates for the benefit of society and in line with Iceland’s energy policy. Oversees aspects such as pricing (revenue and tariffs), quality, and security of supply. Mission to build knowledge in its areas of operation, such as energy production, utilization, and climate issues, and to practise efficient and transparent governance as well as independent and rigorous supervision. Orkustofnun oversees Orkusetur, which runs the price comparison tool for consumers.
Consumer authority
Responsible for ensuring the enforcement of legislation laid down to protect the safety of consumers and consumers’ legal protection in various transactions with business operators.
Competition authority
Promotes effective competition in economic activities, thereby increasing the efficiency of the productive factors of society. The supervisory work of Samkeppniseftirlitið extends to all forms of business activities, regardless of whether such activities are conducted by individuals, companies, public entities, or other parties.
Consumer council
Neytendasamtök Íslands
Membership-based association with the main objective of safeguarding the rights of consumers in Iceland. Offers members free legal guidance and assistance if needed, and provides general legal guidance and information for non-members during opening hours on Thursdays.
Industry organization for electricity retailers
The association of the Icelandic electricity industry, district heating, waterworks, and sewage utilities in Iceland. The federations’s purposes and tasks are forwarding the mutual interests of its members, guarding their interests in mutual projects, fostering research and gathering information for its members as well as for public authorities, hosting seminars and conferences, and acting on behalf of members in mutual projects.

7.1.2 Regulatory framework

Retailer requirements

The retail market in Iceland is a free market in which anyone can start a company and become an electricity supplier if certain conditions are met. Electricity retailers are not required to have their own production, which means that companies in the retail market may either produce electricity or not.
Electricity retailers are required to have a licence from the National Energy Authority to engage in electricity trading. This licence will only be granted to independent legal and tax entities. To perform their obligations in relation to operation, applicants must demonstrate their financial capacity. Companies that sell electricity must possess minimum capital of ISK 15,000,000 (around EUR 98,000) and provide a 36-month plan outlining the scope of electricity sales and how they will supply electricity to meet sales agreements. A fee of ISK 50,000 (around EUR 327) must be paid for an electricity trading licence.
Under Icelandic law, a single power company can function as generator, distributor, and supplier. However, accounting separation is required between concession (transfer of electricity in a certain area) and competitive activities.


The required information to be included in invoicing follows government regulation.
Customers in Iceland receive two separate bills: one from the electricity retailer and one from the distributor. In addition, they should receive information about the source of electricity on their electricity bill once a year. Payment is due after the period charged.


Customers are free to choose their electricity supplier, and change of electricity suppliers is free of charge for the customer. The customer can change electricity retailer by contacting the new electricity retailer; the new electricity retailer will take care of the change. Customers can also switch contracts using the price portal.
The customer can terminate a contract with notice of three months or less. Households and SMEs that use less than 0.5 GWh per year are allowed to withdraw from a contract with three weeks’ notice. All retailer switches take place at the start of a new month. Customers that use between 0.5 and 1 GWh per year have a three-month notice period, while consumers of more than 1 GWh per year can have a longer notice period.
While there are no requirements on how to find information about contracts for electricity retailers, this information is made available by the consumer-facing price comparison tool.
The electricity retailer can change the contract whenever they want and publish information about the changes on their website. Customers should receive an email about the changes if they have signed up to do so. 


The marketing of electricity contracts in Iceland follows from the general marketing regulations. Therefore, there are no particular requirements for marketing of electricity contracts. There are no telephone sales or direct sales on the street in the electricity market in Iceland.

SMEs’ customer rights

Consumer protection in Iceland covers both households and SMEs. The Consumer Agency provides the public (consumers as well as business operators) with relevant and up-to-date information concerning legal rights and obligations in transactions with consumers, including issues concerning the security of measurements and products.


The National Energy Authority can issue a written warning and provide a reasonable deadline for rectification if an electricity supplier fails to comply with the Electricity Act, regulations on the execution of the Electricity Act, conditions of the licence, or other provisions. If the electricity supplier does not comply with the warning within the specified timeframe, the National Energy Authority may withdraw or change the licence. In cases of serious violations or neglect, or if it is evident that the electricity supplier cannot meet its obligations according to the licence, the National Energy Authority may withdraw the licence without issuing a warning.
Customers who believe that an electricity retailer is acting unlawfully in its decisions, actions, or emissions can contact the Energy Regulatory Authority. If the electricity retailer does not act in accordance with the provisions of electricity laws, the Energy Regulatory Authority may demand that corrective measures be taken, and penalties may be imposed.
The Consumer Agency is empowered by law to use various sanctions and enforcement measures if necessary, such as sales bans, recalls, fines, and other measures as laid down in the legislation. As the competition authority, Samkeppniseftirlitið have sanctioning power over violations of the Competition Act.

7.1.3 Government response to the energy crisis

The Icelandic government has not implemented any measures in response to the energy crisis. The electricity grid in Iceland is not connected to any other countries, meaning that the country is self-sufficient. As a result, electricity prices in Iceland have largely been unaffected by the energy crisis in Europe, and no countermeasures have been deemed necessary.

7.2 Competitiveness and the functioning of the market

7.2.1 Competitive landscape

Competition in the Icelandic electricity retail market has improved over the past five to 10 years, although it still lags behind the level of competition seen in other Nordic markets. In 2005, the traditionally vertically integrated companies were split up; from 2006, all electricity users had the right to choose their electricity retailer. Despite this, small independent electricity retailers did not enter the market until 2016. There are currently nine electricity retailers in the Icelandic retail electricity market, and with the introduction of new companies, Iceland now has four electricity retailers that do not offer power production. The market shares of the largest electricity suppliers are high; the market is characterized by a few large electricity retailers and a few smaller ones. Statistics from the household survey show that the five largest retailers (by market share) account for 85% of the total market (Figure 7‑1), and the single largest retailer has a market share of 31%. The largest suppliers in the market are those that were traditionally vertically integrated, while the smaller ones are new entrants without, for instance, power production in the same conglomerate. Using the results from our household survey, we estimate the Herfindahl-Hirschman index of the retail market to be 1,900, indicating a moderately competitive market with a reasonable number of firms.
Figure 7‑1: Market shares of the nine largest retailers (Iceland)
Note: The market shares are estimated from a survey conducted amongst Icelandic households in October and November of 2023. The shares are weighted. N=36
In the wholesale electricity market, direct competition is rather limited, primarily due to Lands­virkjun's dominant position. While various other electricity retailers are also electricity producers, the majority of their generated electricity is dedicated to serving their own customers, leaving the independent electricity retailers with minimal sur­plus for the wholesale market unless they purchase it from Lands­virkjun. Lands­virkjun has 70% of electricity production, with most of the electricity produced (80%) sold to energy-intensive industries via long-term contracts; the remaining 20% is bought by public utilities and the Icelandic TSO. The absence of a functioning whole­sale mar­ket poses challenges for electricity retailers in achieving fair com­pe­tition, as prices are determined by Landsvirkjun, leading to a market primarily built on bilateral agree­ments between Landsvirkjun and the electricity retailers. There is also no finan­cial market for electricity in Iceland, making risk management and price hedging difficult. The lack of a functional financial market also removes essential price signals in the market.
It is not difficult to obtain a licence to operate as an electricity retailer in Iceland, and some new electricity retailers began entering the electricity retail market in 2016. However, there seem to be some substantial entry barriers to the Icelandic market. In particular, electricity retailers with their own power production seem to have significant competitive advantages over those that do not, as they have better potential to purchase electricity. All electricity retailers are subject to the same prices from Landsvirkjun, but retailers with their own production can potentially obtain lower electricity costs, as they have an extra alternative to purchasing their electricity. The margins in the electricity retail market are already low, so retailers who have their own power production enjoy advantages over other electricity retailers.
Iceland has a relatively small proportion of customers who switch their electricity retailers, particularly among households but also for SMEs. In 2017, there were approximately 370 customer switches for households, even though there are about 140,000 household customers in the country. This low mobility is likely due to how low the energy consumption of households is, with an average of about 4,500 kWh per year and annual energy bills of 225–250 Euros. As such, the potential amount of money that households can save per year is minimal. Icelandic SMEs also have relatively low electricity consumption and are thus unlikely to be particularly active in seeking cost-effective electricity purchases. Approximately 150–200 companies switch their electricity supplier annually.  
Despite the low mobility in the Icelandic market, some evidence indicates the emergence of new electricity retailers contributing to increased competition and, in turn, lower prices for consumers in the electricity retail market. The lowest offered price to households has decreased by 20% from 2018 to 2021. According to Landsvirkjun, the same also holds for the non-household segment. However, it is too early to attribute these lower prices to increased competition between electricity retailers, as the lower prices may also be caused by demand and supply effects.

7.2.2 Contracts and prices

According to our survey, 83% of respondents indicated that they could find at least one contract that aligned with their needs and preferences, while 13% did not know whether the available contract types met their needs. For those who did find at least one relevant contract, 16% found just one, 42% found two or three, and 25% found more than three.
The most prevalent electricity contract among Icelandic households is a variable-price contract (Figure 7‑2). The remaining 40% do not know which type of contract they have. A variable-price contract in Iceland entails a fixed-price contract where the price can change several times throughout the year; in practice, this typically happens once a year.
Figure 7‑2: Contracts (Iceland)
Note: The contract shares are those reported by respondents in a survey conducted amongst Icelandic households in October and November of 2023. The shares are weighted. N=369.
In the survey, we assessed Icelandic households’ awareness of the pricing details in their contracts. For variable-price contracts, approximately 30% of respondents have a price range of 6–7.99 krónur/kWh, while around 10% fall within the 4–5.99 krónur/kWh range. In addition, 50% do not know the price per kWh for their variable-price contracts; this high proportion is likely due to the customers’ entering the contract a long time ago. However, this is not a surprising result given how low and stable prices have been in the retail market, as well as how the electricity bill constitutes a very low sum in a typical household’s budget. Electricity prices in Iceland are much lower than other OECD countries, as Iceland’s renewable energy resources are abundant and available at a low cost.
Figure 7‑3: Per kWh price for variable price contracts (Iceland)
Note: Price per kWh for respondents with a variable price contract. In Icelandic króna. Survey conducted in October and November of 2023 amongst Icelandic households. N=227.

Impacts of the energy crisis

The European energy crisis had no direct impact on Iceland’s electricity retail market, primarily because it operates as a closed system without interconnections to other countries through cables, thus preventing any increase in electricity prices. There was, however, a large increase in aluminium smelting production, driven by rising international aluminium prices at the same time as the energy crisis occurred. Aluminium smelters constitute a significant part of the industrial activity in Iceland and thus the country’s energy consumption. This increase in production, therefore, led to much higher electricity demand during this period. That said, the low energy prices during the crisis compared to the rest of Europe did attract new industries, particularly power-intensive companies seeking cheap power sources.
The heightened demand for electricity drove up prices in the wholesale market, resulting in increased operational costs for many companies. While some of these costs were passed on to customers in the form of higher prices, a substantial number of companies opted to internalize these expenses rather than transferring the full cost increase to their customers. As a result, the already low profit margins for several electricity retailers in Iceland were further reduced.
Electricity prices in Iceland are largely influenced by the state-owned company Landsvirkjun. Landsvirkjun has 70% of the power production in Iceland, and the absence of a wholesale market grants Landsvirkjun significant control over the price of electricity. Iceland also still lacks a functional financial market for electricity trading. The absence of such a financial market means that future electricity prices cannot be effectively set, which leaves consumers potentially exposed to price fluctuations without the ability to secure long-term price stability through financial instruments. This absence of both a functional wholesale market and a financial market are unique challenges facing the Icelandic electricity market.
A significant present-day concern in Iceland is that the supply of electricity is expected to fall below the growing demand in the near future. Landsvirkjun reports that they were operating at full capacity as of September 2023. This creates potential challenges regarding energy shortages and maintaining a stable and affordable power supply for both existing industries and those newcomers attracted by low energy prices.

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

In Iceland, variable-price contracts are the prevailing system for electricity contracts, and the country does not have a market for spot prices. Prices are typically adjusted once a year, often on 1st January, when Landsvirkjun also adjust their prices. Electricity retailers purchase electricity from Landsvirkjun once a year through bilateral agreements. Although prices are typically fixed for a year, consumers can change electricity supplier at three weeks’ notice.
Approximately all household customers and a little under 50% of SMEs still rely on manual electricity meter readings, according to the market actors interviewed. This imposes limitations on the types of agreements that can be established. In contrast, a greater share of larger companies have adopted smart meters, which allow for diverse pricing strategies, such as peak power pricing and longer contract options.
The dominance of variable-price contracts can also be credited to the fact that Landsvirkjun is the main power producer for the electricity retail market, and electricity retailers source their power from Landsvirkjun or their own production through fixed contracts. The wholesale electricity price is set by Landvirkjun, with no price fluctuation during the day. While some seasonal price variability exists, this is typically not passed on to the customer. As far as we have understood, the markup may be significant, at least compared to markups on spot-price contracts in other countries.
Electricity retailers in Iceland are only able to secure energy from the wholesale market for a maximum period of just one year, typically through closed contracts with Landsvirkjun. This limited timeframe makes it particularly challenging to predict electricity utilization during the winter season. However, electricity retailers do have the option to buy more, but this typically comes at a higher cost. This can be particularly challenging for electricity retailers who do not have their own energy production and are therefore dependent on purchasing electricity from Landsvirkjun. Overall, this limits the electricity retailers’ ability to expand in the market, thereby restricting the potential for well-functioning competition in the electricity sector.

7.3 Customer awareness and satisfaction

The most important source of heating of households in Iceland is district heating (Figure 7‑4). While district heating is the most important source of heating for around 90% of households, electricity is the most important source of heating for 8% of households. Although 70% of households do not know their electricity consumption per year, consumption is low for those who do (Figure 7‑5).
Figure 7‑4: Most important source of heating (Iceland)
Note: The graph shows the most important source of heating in the household. Survey conducted in October and November 2023 amongst Icelandic households. N=555.
Figure 7‑5: Household electricity consumption per year (Iceland)
Note: The graph the reported yearly electricity consumption. Survey conducted in October and November 2023 amongst Icelandic households. N=369.

7.3.1 Awareness during search and switching

Electricity is generally a low-interest product in Iceland, as prices are low and most heating comes from geothermal energy sources. In the survey, respondents were asked about issues related to comparing and switching contracts, whether they felt well informed to do so, and other relevant issues.
Figure 7-6 illustrates that only 22% of respondents had engaged in either switching or comparing electricity contracts in the preceding 12 months. This suggests that Icelandic households are for the most part inactive, which supports the notion that competition in the Icelandic market does not function optimally.
Figure 7‑6: Share of consumers active in the electricity market last 12 months (Iceland)
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 Icelandic households. N=369.
Those respondents who reported facing challenges when switching or comparing contracts had one or multiple reasons for the difficulties they encountered. The results emphasized two main challenges: the difficulty in distinguishing between various contracts, and the complexity of comparing contract terms. Additionally, understanding the terms and conditions posed a challenge for some respondents (Figure 7‑7). The main challenge reported by the respondents was due to ‘other’ reasons.
Figure 7‑7: Challenges in switching or comparing contracts (Iceland)
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 Icelandic households. N=78.
Among the respondents who had compared or switched contracts, approximately 50% reported feeling well to very well informed, while approximately 30% felt neither informed nor poorly informed when it came to switching or comparing contracts (Figure 7‑8). Conversely, less than 10% expressed feeling poorly informed in these situations. These results may appear somewhat surprising considering that a significant portion of respondents reported challenges in differentiating between contracts, comparing contract terms, and comprehending terms and conditions. This may suggest that the respondents were able to grasp the necessary information to make an informed decision, but that the process itself may be unnecessarily difficult and time-consuming.
Figure 7‑8: How informed respondents felt when switching or comparing contracts (Iceland)
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 Icelandic households. N=78.
Household respondents mentioned various reasons for not switching or comparing contracts. Approximately 80% stated that their primary reason was the lack of considerable savings associated with switching (Figure 7‑9). Furthermore, 7% of respondents chose not to switch due to a lack of reliable information and difficulties in comparing contracts. This implies that these consumers are price-driven, which may contribute to more effective competition, all else being equal. 
Figure 7‑9: Reason for not switching after comparing contracts (Iceland)
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 Icelandic households. N=42.
The Icelandic market has been characterized by low mobility, and there are various reasons why consumers have refrained from switching and comparing contracts. The survey results show that the primary reason is the perception of limited potential for savings in a new contract. The second most prevalent reason is the high level of satisfaction with existing contracts (Figure 7‑10). Other reasons included that it was hard to find information on contracts and sellers. This could suggest that the competition on price in the market is restricted, or alternatively that households’ electricity consumption is so modest that even a minor percentage fluctuation in prices among electricity retailers would not yield substantial monetary savings for end-consumers. The limited potential for savings, coupled with the considerable time and effort required to seek out a more favourable contract, thus prevents consumers from engaging in the process of contract switching or comparison.
Figure 7‑10: Reason for not switching or comparing contracts more often or at all (Iceland. 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 Icelandic households. N=314.
Among the active customers, the context for switching contracts varies between consumers: 65% of those who had switched contracts did so because they were contacted by a seller, while 25% did so because they were moving. None of the respondents reported that they had switched contracts because they were actively seeking a new contract, which implies that the minority who are active customers chose not to actively seek a new contract with the intention of finding a better option, instead accepting an offer when contacted. Furthermore, when consumers are approached by sellers, they may be led into contracts that are not in their best interest, especially if they are not well informed about their current contract. Ultimately, these factors pose a challenge to competition in the market.
Win-back is not a strategy that many electricity retailers in Iceland use: Only 7% of consumers responded that they had been contacted by their previous supplier after switching to a new one (N = 36).
Figure 7‑11: Context for switching contract (Iceland)
Note: The graph shows the context for having switched contract. Survey conducted in October and November of 2023 amongst Icelandic households. N=36.
The survey reveals that the main motivation among those who had already switched contacts was that the new contract offered a better price. This is in line with how almost 80% of the households in the survey responded that the reason for not switching was that there was little money to save (Figure 7‑9). Overall, this indicates that consumers are drawn to low prices, giving suppliers an incentive to compete on price. Surprisingly, none of the respondents expressed a desire to switch due to negative experiences with their current electricity retailers. This indicates that the suppliers generally operate in a consumer-friendly manner.
Figure 7‑12: Main motivation for switching (Iceland)
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 Icelandic households. N=36.
The most important source of information used by respondents the last time they had switched or compared contracts was an online comparison tool (Figure 7‑13). Of those who had not switched or compared contracts during the last 12 months, 62% reported it likely that they would use an online comparison tool if they were to compare contracts in the future. On the other hand, within the same group, 27% reported that they were not familiar with any online comparison sites. Ultimately, this implies that the efficiency of the market depends to a high degree on a price comparison service providing relevant and reliable information and consumers being well informed about these services. The second most important source of information when switching or comparing contracts was through internet search. 
Figure 7‑13: Most important source of information when switching or comparing contracts (Iceland)
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 Icelandic households. Switched contracts: N=28 Compared contracts: N=70.

7.3.2 Customer awareness and demand for different contracts

The customer awareness is considered low in Iceland, which is not a surprise as the typical electricity bill for an average household accounts for less than 1% of their total income. Furthermore, Ice­landic households do not have automatic meters and only need to manually read their electricity consumption once a year. This means that Icelandic consumers have few incentives to track their running electricity consumption and to purchase pro­ducts or con­tracts that enable them to reduce or move their con­sumption. To most consumers, electricity is a homogenous and low-interest product.
As a result of most households having manual meters, most Icelandic consumers have variable-price contracts. The survey shows that variable-price contracts are the typical system in Iceland (Figure 7‑2) and are offered to both households and SMEs. There is no spot market, only tariffs based on usage profiles. The most common tariff is a fixed tariff, which is a fixed fee per kWh regardless of utilization time. The prices of these contracts can change several times throughout the year; in practice, this typically happens once a year. Although there are certain differences in the prices between the different contracts offered, the aggregated cost differences over a year are relatively small. By Icelandic law, these contracts cannot last for more than three months for consumption above 1 GWh per year, but the customer can exit the contract whenever they want. The other type of tariff is a mix of the cost of power use and energy use.
The survey results suggest that Icelandic households are for the most part inactive in this market (Figure 7‑6). Among the active customers, 65% of those who have switched contracts did so because they were contacted by a seller, while 25% did so because they were moving (Figure 7‑11). The system when moving in Iceland demands that a customer with no history of buying electricity must change their retailer within 30 days after moving in to prevent their electricity being cut off. Customers are therefore forced to choose a retailer, which may describe why 25% of those who switched contracts in the survey did so because they were moving. Crucially, none of the respondents’ report that they switched contracts because they were actively seeking a new contract.
Although the general level of customer awareness in the electricity retail market can be considered low, it has likely increased in recent years. This can be attributed to increased competition in the market following the introduction of new suppliers, the introduction of the price portal, and various regulatory changes pushing consumers to choose an electricity supplier when they move. There is also some indication that the expansion of electric vehicles (EVs) has to some extent increased customer awareness among a segment of consumers. The number of EVs in Iceland has increased in recent years, numbering around 24,300 in 2022. Some electricity suppliers offer charging stations and reduced electricity prices for consumers with EVs, potentially contributing to this increase in customer awareness.
Demand for electricity in Iceland is mainly driven by industry; the demand from households accounts for only approximately 5% of total consumption/production. Landsvirkjun is the national power company that sets the price for electricity. A few different contracts are offered in the market with limited scope and duration. Due to competitive issues in the market, customers in the retail segment cannot be bound for more than five years. Contracts in the wholesale part of the market last for a year at most due to the electricity retailers only being able to secure energy from their side in the wholesale market for up to a year at a time.
Customers generally do not care about the electricity market in Iceland, since the price on electricity is so low. This low level of interest makes it hard to tell whether customers understand the terms and conditions in their contracts. However, billing can in some cases be difficult to understand, as both the retailer and the distributor have their own prices. Hence, the customer is presented with two separate bills from two different companies, one from the retailer and one from the distributor. A price portal can be used if the customer wishes to change retailer; this price portal is not specific to energy, but it does make it easier for the customer to compare different electricity retailers. However, the evidence suggests that they will not usually change retailer due to low consumer interest.

7.3.3 Invoicing and billing

Figure 7‑14: How electricity bill is received (Iceland)
Note: The graph shows how respondents receive the bill from their electricity supplier.
Survey conducted in October and November of 2023 amongst Icelandic households. N=369.
Almost all respondents report that they receive their electricity bills electronically (Figure 7‑14). Among the respondents seeking information on their electricity bills, three specific aspects of the invoice were highlighted (Figure 7‑15): 60% were interested in the amount to be paid, while only 20% and 15% were interested in the estimated annual consumption and the cost breakdown, respectively. At the same time, approximately 40% of respondents do not read the information on their invoices. This further highlights the extent to which electricity is a low-interest product in Iceland, as neither the choice of retail supplier nor the information on the bill (other than the sum to be paid) is very important to the end-customer.
Figure 7‑15: What information respondents read on their invoice (Iceland. 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 Icelandic households. N=369.
For approximately 80% of respondents, the preferred method of receiving notifications about changes to the electricity contract or other relevant aspects is by email. This was followed by a variety of different methods, such as by text message or separate letter (Figure 7‑16).
Figure 7‑16: Preferred method of being notified of changes to the electricity contract or other aspects that may affect the customer (Iceland. 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 Icelandic households. N=369.

7.3.4 Customer satisfaction

There are generally no complaints from customers in the energy market in Iceland, as there is low interest in the market. Customers in Iceland are unaffected by any cost changes as they are mostly on variable-price contracts that entail an element of fixed pricing. An exception from this is in 2022, where 10% inflation resulted in a 10% increase in prices. As prices were already low, this increase was almost imperceptible in the actual price changes. Iceland also predominantly uses geothermal energy to heat its buildings. This is available in most areas, and those areas where it is not accessible are subsidized by the government.
Despite the electricity retailers having to increase their prices somewhat due to increasing prices in the wholesale market, no complaints have been made by customers regarding this pricing increase. In this way, customers in Iceland are far less price-sensitive than customers in other countries, so this has not had a great impact on customer satisfaction in a country where a typical electricity bill is less than 1% percent of the average household’s income. While SMEs have complained about the larger companies pursuing aggressive win-back strategies, the only time that these larger, more established companies compete on price is when they face the risk of losing specific customers.
That said, problems have arisen concerning the default system when moving to a different place. Some customers were charged high prices after the default system placed then on the most expensive tariff in Iceland. However, those customers who were overcharged only needed to call the retailer to obtain a lower price and compensation. This system was implemented in December 2019 and led to many customers changing their supplier. However, this system of retailer of last resort was changed in May 2022 such that customers who already have a history of buying electricity are automatically assigned their most recent retailer, while customers with no such purchasing history must change their retailer within 30 days after moving or risk being cut off. Some market players state that this is why consumers are now thinking about their electricity supplier. As a result of customers being forced to choose a retailer, the competitive landscape in the Icelandic market has changed.
Another reason why customers may change retailer is if they own an EV and are therefore in the market for a charging station. EVs have increased interest in the market over recent years. Indeed, one of the interviewed actors in Iceland stated that customers who own an EV have doubled their electricity use. While this is a small segment of the market, customers are nonetheless becoming more aware about the price of electricity. It can be said, therefore, that knowledge levels have increased with the number of customers who own EVs.
Little evidence exists regarding general customer satisfaction in the Icelandic electricity retail market. However, there is little reason to believe that customer satisfaction is particularly low. None of the interviewed actors considered it to be particularly high or low. Prices and costs for consumers are generally low, customers can easily switch between different electricity retailers, and few knew of examples where electricity retailers had actively tried to deceive customers. The only example mentioned was from 2020, where the regulations were changed so that households were automatically placed with the electricity retailer with the lowest tariff when they moved housing; in reality, it turned out that these households did not receive the lowest tariff. This case gained widespread media attention, and the customers affected were eventually refunded. The Icelandic consumer agency reported that they had not received any complaints regarding the electricity retail market after the media scandal. One of the interviewed actors in Iceland did point to a split in customer satisfaction between urban and rural areas: consumers in the former generally do not care about prices, while those in the latter may complain about cost and/or service.
In Iceland, a little under 70% of respondents reported negative experiences with their retail suppliers. According to the survey, the main problem for the customer is that the bill is hard to understand, followed by the price being higher than expected (Figure 7‑17). Here, the negative experience regarding the price development is not necessarily the electricity retailers’ fault, but rather the inflation causing the price per kwh to rise. The bill being difficult to understand seems, however, to be a general issue in the market, indicating an opportunity for improvement in making this aspect more consumer-friendly. Other problems mentioned were related to terms being different than expected, misinformation by seller or other resources, or that the seller changes terms or transfers the customer to a different contract without notice. While these issues may not seem significant given the low percentage of people experiencing them, they do suggest that electricity retailers could benefit from adopting more consumer-friendly practices regarding contract terms and communication with customers.
Figure 7‑17: Negative experiences with electricity seller (Iceland. 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 Icelandic households. N=369.
Approximately 30% of respondents reported having negative experiences with their retail supplier, and 25% reported negative experiences not related to pricing. The households’ responses to negative experiences varied. For this survey question, we have chosen to exclude those who justified their negative experience by stating that the price was higher than expected. This is because this price development was driven by external factors in the market. Among those who had other reasons for having a negative experience, 65% reported taking no action in response. Approximately 20% complained to the retail supplier, a little under 20% switched to a different supplier as a result, and 15% chose to complain to the relevant authority (Figure 7‑18). Despite their negative experiences, most customers were not motivated to take any action. While there could be several reasons for this, a notable factor is that 80% of the customers in the market may be considered inactive.
Figure 7‑18: Consumers’ response to a negative experience (Iceland. 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 Icelandic households. N=162.

Impacts of the energy crisis

Icelandic electricity prices were relatively unaffected by the European energy crisis, as the Icelandic grid is not connected to Europe. The relative price differences between Iceland and the rest of Europe made Iceland more attractive to new and existing industries, especially aluminium smelters, which increased production as they could sell their products at higher prices in international markets. This in turn contributed to increasing electricity prices for the industry. However, consumers in the electricity retail market were relatively unaffected by this, as a fixed part of Landsvirkjun’s energy production is reserved for the electricity retail market. For household consumers, the most notable effect of the European energy crisis was increased prices for imported goods.