Oscarsborg Fortress, Norway. Photo: Unsplash / Vidar Nordli-Mathisen

Several Norwegian authorities have a role in regulating and overseeing the retail market for electricity; they are described alongside their relevant regulations in Table 8‑1.

Chapter 4 of the Energy Act (Energiloven) specifies that one needs a trading licence from the Regulatory Authority for Energy (RME) to engage in the trading of electrical energy and outlines the conditions that must be met to obtain such a licence. These requirements are not complex and do not pose a significant barrier to establishing oneself as an electricity supplier in Norway.

The Energy Act also imposes requirements for the structural and functional separation of vertically integrated entities that have been assigned system responsibility or that have more than 100,000 network customers. The requirement for structural separation means that the network business must be separated from businesses engaged in the production or trading of electrical energy, and these entities must be organized as independent legal entities. The requirement for functional separation means that individuals in the management of the network business cannot participate in the management of businesses engaged in competitive activities within the vertically integrated entity. In practice, there should be a clear separation between the DSO and the electricity supplier.

Requirements for invoice design are specified in the Regulations on Settlements (Avregningsforskriften). First, the invoice must be clear and easily understandable for the consumer. It should include information about the basis for the invoice, including separate line items for all price components, electricity volume, and whether the consumer receives mandatory electricity delivery. Furthermore, if estimated values are used as the basis for billing, this must be clearly stated on the invoice. The invoice should also include the electricity spot market area for the consumer measuring point.

Additionally, the invoice should inform the consumer of their ability to compare electricity supply agreements on the public price comparison site strømpris.no. It should contain the name of the electricity supply agreement, the agreement’s duration, and the notification procedures in the event of changes to the agreement. If the agreement includes a price guarantee, the duration of the price guarantee should be prominently displayed on the invoice. In contracts directly tied to the spot price in the relevant electricity spot market area, it must be explicitly indicated on the invoice if the price is not calculated hourly based on consumption. The invoice should also provide information about the consumer’s right to raise objections to the invoice, including the consumer’s right to contact the Electricity Complaints Board (Elklagenemnda), the contact information for which must be included.

The invoice from the electricity retailer can also include costs and tariffs from the DSO. The terms regarding combining retailer and DSO costs in one invoice are established as a voluntary arrangement. The voluntary nature of this arrangement means that DSOs can choose to offer electricity suppliers the option to include the DSO tariffs in the retailer invoice, but if they do so, it must be extended to all interested electricity retailers. Likewise, an electricity retailer can choose to include DSO tariffs in their invoices, but if they do, they must implement this for all customers in the DSO area.

The regulations state that an electricity supplier can invoice the customer both in advance and in arrears. In cases of pre-billing (payment in advance), the period between the invoice due date and the delivery date must not exceed 10 weeks. 

Customers can change electricity supplier by creating a new electricity agreement with an electricity supplier. It is free to change electricity supplier unless the customer has an agreement with a lock-in period. The new electricity supplier notifies the previous supplier about the new electricity agreement. The Regulations on Settlements (Avregnings­forskriften) state that a written electricity supply agreement between the electricity supplier and the customer must be in place when switching. It is required that the electricity supply agreement must, at a minimum, contain information about the metering point ID, the customer’s personal identification number or organizational number, the customer’s name or company name, the product covered by the agreement, and the customer’s consent.

Angrerettsloven regulates consumers’ rights to cancel or withdraw from purchases such as online purchases, telephone sales, sales at stands, or door-to-door sales. The customer has a 14-day right of withdrawal when purchasing electricity when the agreement is considered a distance sale (typically when the agreement is entered into over the phone or the internet) or sales outside a fixed retail location (typically through door-to-door sales). If the customer has not received sufficient information regarding the right of withdrawal before entering the agreement and/or the customer has not received a withdrawal form on a durable medium after entering the contract, the withdrawal period is extended by up to one year. Lock-in periods for contracts should be no longer than 12 months, with the exception of fixed-price contacts. Customers should receive a financial benefit for entering into a contract with a lock-in period, such as a discount on electricity or other services. The customer can terminate such contracts by paying a reasonable termination fee.

Strøm - Forbrukertilsynet

The Price Information Regulation (Prisopplysningsforskriften) establishes requirements for electricity suppliers to have an up-to-date price list readily available at the location or in the channels where consumers can enter into electricity agreements. This means that all electricity suppliers are obligated to register their prices on strømpris.no so that consumers have an overview of all the contracts in the market. This price list should provide a comprehensive overview of prices and terms for all the electricity supplier's various electricity agreements, including agreements that are no longer offered but still have active customer relationships. Furthermore, the price list for each individual electricity agreement per price area should specify the agreement’s name, type, and price, along with a link to the agreement terms.

Requirements for notifying consumers about changes to or termination of their electricity agreement are also presented in the Price Information Regulation (Prisopplysnings­forskriften). The supplier must inform the consumer of all changes to or termination of the electricity agreement no later than 30 days before the change or termination of the agreement takes effect. This includes changes in the price agreed upon at the time of the contract (except for changes in the spot price). The notification should clearly explain the reason for the change in the agreement or the termination of the agreement, and whether the consumer has the right to terminate the agreement at no cost. Notifications should be formulated in a way that makes the content and changes clear and understandable to the consumer. This means that the price and terms before and after the change should be clearly presented. Furthermore, the notification should be provided separately and should not be mixed with other information from the supplier. The notification should be sent to the consumer via SMS and email, or by post if the consumer has not consented to digital communication methods.

There are also current proposals submitted by the Ministry of Petroleum and Energy and the Ministry of Children and Family Affairs for changes to laws and regulations aimed at reducing the information asymmetry that consumers experience in the electricity retail market. The measures include an obligation to inform electricity customers if their agreement does not follow the spot price on an hourly basis, strengthened consumer protection for sales through certain channels (including the introduction of a cooling-off period), improved consumer rights in the event of unilateral changes to electricity contracts, requirements for information on breach fees, a reduced period for permitted advance billing, withdrawal of trading licenses for violations of relevant regulations, and new requirements regarding electronically documented consent during supplier changes and facility takeovers. These proposed changes are aimed at strengthening the requirements around information on contracts, how changes to contracts are communicated, and also changes in regards to what is allowed to be included in the terms and conditions of contracts.

On 1^st November 2022, new and stricter rules for the marketing of electricity contracts were introduced. These requirements for marketing were largely a clarification of the requirements already followed from the Marketing Act. Consumers must receive sufficient information in company marketing to enable them to understand what both the contract and the product or service involve. Consumers must also be able to use this information to compare with other contracts. The Price Information Regulation provides a list of information that is considered essential according to the Marketing Act. The electricity supplier must provide information about contract type, mandatory price components and their size, duration of the contract and price components, any lock-in period and termination fee, advance payment and period for advance, conditions to qualify for the contract, additional services, and notice of comparison at Strømpris.no.

Win-back strategies are allowed and can take place both by telephone and on the door, as well as in writing. It can thus be regarded as a form of direct sales aimed at a customer group that has made an active choice to switch supplier. Angrerettsloven provides the customer with various rights and information requirements when it comes to sales outside a fixed retail location, such as online purchases, telephone sales, sales at stands, or door-to-door sales. The law also regulates consumers’ right to cancel or withdraw from these purchases. The information requirements include details about the goods or services, such as main characteristics, total price, any additional charges,

If the price cannot reasonably be pre-calculated, the method for calculating the price should be provided, along with any additional costs (or an acknowledgment that they may occur). For subscription agreements, the total price should encompass the costs per billing period, or the method for calculating them if the total costs cannot be pre-calculated.

the agreement’s duration or minimum contract period, and conditions for terminating the agreement. Agreements marketed through unsolicited sales over the phone are not considered to be entered into until the business has confirmed the offer in writing on a lasting platform after the telephone call has ended and the consumer has accepted the offer in writing. Typically, this is done via SMS. There are also specific requirements regarding the minimum information to be provided when the agreement is made through a means of remote communication with limited space or time to display information. Here, the customer should receive a written confirmation of the agreement on a lasting platform within a reasonable time after the agreement is concluded and no later than before the delivery of the service begins.

SMEs do not have the same consumer protection as households, and they have considerably fewer consumer rights. If SMEs are exposed to illegal behaviour from electricity retailers, they cannot complain to Elklagenemnda or the Competition Authority as households can. SMEs must contact lawyers to receive help regarding these issues, or solve the problem themselves. Similarly, they do not have the same type of withdrawal rights as household consumers.

The RME, the Consumer Authority, and the Competition Authority have the authority to address violations of the laws and regulations they respectively oversee. Retailer licenses can be withdrawn both by the RME and the Ministry of Petroleum and Energy, but no retailers have so far been deprived of their licences. Licences can be withdrawn if the licensee has provided incorrect or incomplete information about matters of significant importance. This also applies when the licencee is no longer considered fit to carry out the business after serious or repeated violations of the law or provisions or orders issued pursuant to the law.

Lov om produksjon, omforming, overføring, omsetning, fordeling og bruk av energi m.m. (energiloven) - Kap. 4. Omsetning av elektrisk energi - Lovdata. Date: 29.11.23

The RME have the authority to withdraw retailer licences for violating the licence conditions, the Energy Act, and associated regulation, but not for violating the Marketing Act or Angrerettsloven. The RME’s ability to withdraw a licence is limited to when there is incorrect information of significant importance for the decision, or in cases of gross or repeated violations of the Energy Act and associated regulations whereby the retailer is no longer fit to conduct business.

https://www.nve.no/media/15669/rapport-sanksjonsmuligheter-overfor-kraftleverandoerer.pdf. Date: 29.11.23

The RME are entitled to use various means of reaction and sanctions against electricity retailers who break the regulations they enforce. The RME can react with compulsory fines, report, impose infringement fees, or fully or partially confiscate dividends. The Consumer Authority (Forbrukertilsynet) has the authority to impose financial sanctions on actors that violate the Marketing Control Act (Markedsføringsloven). Changes to the Regulation on Determining Coercive Fines and Penalty Fees (Endringer i forskrift om utmåling av tvangsmulkt og overtredelsesgebyr) specify the maximum size of penalty fees: up to 4% of the business’s annual revenue or up to 25 million Norwegian kroner

In December 2021, the government introduced a temporary national electricity support scheme for households. The electricity support has been adjusted several times.

https://www.regjeringen.no/no/tema/energi/strom/stromstotte-til-husholdningene-tidslinje/id2929222/. Date: 29.11.23

The RME manages and oversees the electricity support scheme, which is directly linked to households’ electricity consumption.

As of 16^th June 2023, the Norwegian support scheme covers 90% of prices above 70 øre/kWh excluding VAT. While the scheme was changed by law on 16^th June, it was not implemented until 1^st September 2023. The electricity support is based on the average market price (spot price) on an hourly basis in the local pricing area to which the household belongs. When the electricity price in a given hour exceeds 70 øre, the state will pay 90% of the price above this level. Under the scheme, a household receives support for electricity consumption of up to 5,000 kWh per month per measuring point.

Prior to the legal changes that came into effect on 1^st September 2023, the electricity support scheme was not based on the average price on an hourly basis, but the average market price of electricity (spot price) for a price area in a given month.

The electricity support scheme has also changed a number of times when it comes to the percentage covered above 70 øre/kWh. When the support scheme was first introduced on 11^th December 2021, it was proposed that if the average electricity spot price over a month exceeded 70 øre per kWh, the state would cover half of the expenses above this level. This was then increased to 55% on 22^nd December 2021. On 8^th January 2022, the government strengthened the scheme once again, and the level was increased to 80%. The percentage was changed for the third time by law on 29^th April 2022, when a distinction was made between winter months (90% covered) and summer months (80%). Lastly, on 16^th June 2022, it was increased to 90% regardless of winter or summer season.

The support scheme reduces risk for consumers by covering parts of their electricity bills during periods of high electricity prices. Since the support is linked to the spot price, it provides particularly good price security for consumers with spot-price contracts. In some cases, consumers have entered fixed-price contracts or variable-price contracts at high prices and have simultaneously received electricity support based on the spot price. In periods of lower spot prices, these consumers have received less electricity support than expected and have had to pay high electricity bills. Consumers with other types of contracts than spot contracts do not have the same direct price security, although these consumers are effectively protected. The electricity support scheme is currently proposed to last until the end of 2024.

The government introduced a tax on power production, also known as the high-price contribution (høyprisbidraget).

https://www.skatteetaten.no/bedrift-og-organisasjon/avgifter/saravgifter/om/kraftproduksjon/innforing/#1-om-avgiften. Date: 29.11.23

The tax is calculated based on the average electricity price per month in excess of 70 øre/kWh. It is imposed at a rate of 23% of the average electricity price per month above 70 øre/kWh. The tax was introduced due to the exceptionally high electricity prices in parts of Southern Norway and was intended to help redistribute more of the extraordinary income generated from power production. Since the situation improved, the Parliament decided to end the high-price contribution on 14^th December 2023, effective from 1^st October 2023.  

In March 2023, the government made changes to the resource rent tax on hydropower for fixed-price agreements. The goal was to facilitate electricity retailers offering standardized fixed-price contracts to non-household consumers, with such contracts being available for periods of three, five, and seven years. This is achieved by introducing a contract exemption for electricity sold through these standardized fixed-price contracts. The proposal entails that the resource rent tax imposed on power producers will be valued at the actual contract price of these standardized fixed-price agreements, rather than the spot market price, which is the usual practice.

For a limited period, the Norwegian government provided an electricity support scheme for businesses. The support scheme was application-based and limited to companies with at least 3% electricity intensity in the first half of 2022. This intensity was measured as the actual electricity costs as a percentage of turnover. Support was then calculated using a two-step model:

Companies received a subsidy of up to 50% of the investment cost associated with their energy measures. The maximum cap for consumption-based support through Steps I and II for each company under the scheme was 3.5 million Norwegian kroner. The cap applied regardless of whether the company was in Step I or Step II. Together with the investment grant for their energy measures, the maximum cap was 5 million Norwegian kroner.

Competition in the Norwegian electricity retail market appears to be quite robust, with numerous electricity retailers operating in the sector, including large established companies, various small local providers, and new players that profile themselves as innovative. Competition in the market for SMEs is generally similar to that of household customers, with the exception that SMEs have fewer customer protections and rights.

The Norwegian market currently has around 120 electricity retailers,

https://www.nve.no/reguleringsmyndigheten/publikasjoner-og-data/statistikk/statistikk-over-sluttbrukermarkedet/. Date: 29.11.23

offering various products to both households and businesses. However, not all electricity retailers engage in direct competition, as some suppliers only target one or certain price areas, regions, or municipalities. Despite the large number of electricity retailers, the market shares of the largest electricity suppliers are high; the market is characterized by a few large electricity retailers and numerous smaller ones. Statistics from the household survey show that the five largest retailers (by market shares) account for just over half of the market (Figure 8‑1), and the single largest retailer has a market share of 19%. Out of the 120 electricity retailers, 18 have a market share above 1%. Using the results from our Norwegian household survey, we estimate the Herfindahl-Hirschman index of the retail market to be 0.08, indicating low market concentration and a high degree of competition.

Note: The market shares are estimated from a survey conducted amongst Norwegian households in October 2023. The shares are weighted. N=1195. 

Entry barriers can be considered low for new electricity retailers in the market, with new establishments frequently emerging. Statistics from the NRA show that the market shares of large local companies are gradually declining, making the market less concentrated than before.

https://www.nve.no/reguleringsmyndigheten/publikasjoner-og-data/statistikk/statistikk-over-sluttbrukermarkedet/leverandoerskifter-markedsandeler-og-leveringsplikt/. Date: 29.11.23

Nevertheless, many areas in Norway are dominated by a single local provider previously integrated with the local grid company. Although regulations from 2021 mandate a corporate functional separation for grid companies, there can be cases where customers have more trust in the retail supplier when they are in the same corporate group as the local grid company. Higher trust may translate into market power, allowing for higher markups for these local players.

Electricity is a homogeneous product with low switching costs for consumers. The Norwegian market has been characterized by high mobility, especially during the energy crisis, compared to other Nordic countries. Statistics from NVE show that around 700,000 retail supplier switches occur each year, with an increasing number of switches during the more expensive and energy-intensive winter months.

While the market conditions are favourable to healthy competition, the challenge lies in asymmetric information. There is often insufficient or inadequate information available to consumers. For competition to function effectively, consumers need sufficient information to make rational and active choices. A central question is whether consumers in the electricity retail market have the necessary information access and are active enough for competition to work efficiently. It appears that market players attempt to differentiate themselves based on price and product, resulting in a vast number of diverse agreements. There is also a multitude of variable spot contracts; consequently, some less-active consumers have electricity contracts that may not be in their best interests. This could be due to the complexity of navigating the market, making it challenging for consumers to make well-informed choices.

The existing contract options in the market are well suited to meet the needs of most consumers. According to our survey, 75% of respondents indicated that they could find at least one contract aligned to their needs and preferences, while 23% did not know if the available contract types met their needs. For those who did find at least one relevant contract, 15% found just one, 32% found two or three, and 28% found more than three.

The most prevalent electricity contract among Norwegian households is a spot-price contract. In the survey, 75% of respondents have a spot-price contract (Figure 8‑2). The second most common contract type are variable-price contracts. A few years ago, the picture would have been the complete opposite, with a considerably higher share given to variable-price contracts. This indicates that consumers have moved to more competitive contracts. The Consumer Council has for years warned about variable contracts and promoted spot contracts, which may have contributed to this transition. Fixed-price contracts are not very common in Norway (reported by as little as 4% of respondents), as they are only offered to households in Northern Norway.

Note: The contract shares are those reported by respondents in a survey conducted amongst Norwegian households in October 2023. The shares are weighted. N=1195.

In the survey, we assessed households’ awareness of the pricing details in their contracts. For spot-price contracts, customers typically have an additional surcharge per kWh, whereas in fixed- or variable-price contracts, this surcharge is typically integrated into the overall price structure. In addition to the surcharge, some households may pay a fixed monthly fee. In the survey, most respondents with a spot-price contract reported paying a surcharge per kWh between 2 and 5 øre. At the same time, the survey reveals that a large proportion of respondents (45%) are not aware of the surcharge they are charged.

Note: Surcharge per kWh for respondents with a spot price contract. In Norwegian øre with 1 øre = 0.01 Norwegian kroner. Survey conducted in October and November of 2023 amongst Norwegian households. N=903.

For fixed-price contracts, the spread of results tends to be more evident compared to spot prices, due to how customers enter into agreements at different entry times and the agreements have different durations. In the survey, 30% of respondents report a price range of 51–100 øre per kWh, while 25% fall within the 0–50 øre range. Additionally, 5% report prices as high as 301–400 øre. Surprisingly, over 30% of respondents expressed uncertainty about what their fixed price per kWh is, emphasizing a lack of awareness in this regard. Household customers did, however, express a higher awareness of pricing in their fixed-price contracts compared to variable- and spot-price contracts.

Note: Price per kWh for respondents with a fixed price contract. In Norwegian øre with 1 øre = 0.01 Norwegian kroner. Survey conducted in October and November of 2023 amongst Norwegian households. N=49.

For variable-price contracts, the spread of results is similar to fixed-price contracts: 25% of respondents have a price range of 51–100 øre per kWh, while around 15% fall within the 0–50 øre range. There are also 45% who do not know the price per kwh for their variable-price contracts, an even higher share than for fixed-price contracts. In the case of variable-price contracts, this lack of awareness is due to the customers entering the contract a long time ago. For variable-price contracts, the retail supplier sets a fixed price that can change with a 30-day warning based on spot-price development. This may indicate that about half of the customers who have entered a variable-price contract are non-active customers who do not follow the development of the pricing of their contracts. The high number of non-active customers may also explain why these customers typically have more expensive electricity contracts.

Note: Price per kWh for respondents with a variable price contract. In Norwegian øre with 1 øre = 0.01 Norwegian kroner. Survey conducted in October and November of 2023 amongst Norwegian households. N=153.

The energy crisis that began during the latter part of 2021 had an impact on electricity retailers in Norway in several ways. Initially a low-interest product, electricity garnered increased public awareness due to high electricity prices. This heightened consumer awareness has driven innovation in the retail companies. Some electricity retailers have, for instance, increasingly prioritized the development of electricity management products for consumers during the energy crisis, such as tools that enable consumers to control their electricity usage, innovations that facilitate the integration of self-generated power with the grid, and the ability to plan electric vehicle charging based on cost-effective pricing.

The energy crisis has also led to an increased focus on commitment to transparency and consumer trust with regard to both electricity retailers’ marketing and business models. In recent years, new electricity retailers have been established who have marketed themselves as “not trying to trick the costumers, like the other electricity retailers are”. Furthermore, many electricity retailers have shifted towards offering products that are more transparent and easier to understand, such as offering a fixed markup on the spot price in contrast to markups that the retailers can change throughout the contract period. Consequently, the market has seen a shift towards more electricity retailers marketing themselves as consumer-friendly and trustworthy, and having contracts that are easier to understand for customers.

While the energy crisis did not result in bankruptcies among electricity retailers, it posed a substantial threat, especially during the challenging winter months. This may indicate that the retail electricity market was indeed efficient during this time. However, it is important to note that spot-price contracts were the most prevalent prior to and during the crisis, and that the electricity retailers offering fixed-price contracts had generally fully hedged their positions. In addition, electricity suppliers with customers on variable-price agreements also faced challenges during the energy crisis. One of the reasons was due to how the notification period for price changes in variable-price contracts was extended from 14 to 30 days in 2022, requiring suppliers to hedge a significant portion of their volume one month in advance. Several elec­tri­city retailers had to purchase volume at high prices in the financial market in the fall of 2022, right before the spot prices started to fall again. As the suppliers had already procured variable contracts at high prices, they could not offer their customers on variable contracts a lower price to match the spot market. At the same time, the electricity support scheme did not benefit customers on the high-cost variable-price contracts, as it was designed for spot-price contracts. This resulted in a surge in customer enquiries to call centres in September/​October 2022 for many electricity suppliers, which led to a significant shift from variable- to spot-price contracts. Overall, electricity suppliers incurred losses as they did not receive more than they had paid for the electricity in the financial market, and customers lost significant amounts of money by having a much higher electricity price than that in the spot market. Some electricity suppliers considered this their most severe setback during the energy crisis.

In Norway, the government introduced the high-price contribution during the energy crisis, intended to help redistribute more of the extraordinary income generated from power production. However, the high-price contribution also had an impact on liquidity in the financial market. This was because the high-price contribution reduced the possibility or incentive to hedge in all markets other than through standardized contracts. This included both financial trading and over-the-counter (OTC) trading with contracts not covered by the exemption. As a result, it is likely that liquidity was diverted from other markets, enabling producers to offer their standardized contracts on somewhat better terms than other agreements (by utilizing these contracts, they minimized their tax obligations if they anticipated price variations above and below 70 øre). Therefore, Parliament decided to end the high-price contribution scheme in December 2023.

Furthermore, the crisis brought a liquidity challenge for certain electricity retailers, with smaller retailers being more vulnerable than larger and more established retailers. The working capital requirements associated with many electricity retailers’ operations increased substantially. This was due to how many electricity retailers took out loans, purchased and paid for electricity, and covered the costs for customers for up to a month or more before customers settled their invoices. As electricity prices and interest rates rose, the amounts that the retailers needed to borrow increased. Many electricity retailers found themselves facing loan terms resembling consumer loans rather than standard corporate financing arrangements. This was due to how the conditions in the financial sector changed due to the high exposure many institutions in the Nordic region had in the electricity sector, leading to substantial uncertainty regarding their ability to meet payment obligations.

Some respondents also stated that this challenge was more pronounced for the smaller electricity retailers because they often lacked the same financial backbone as larger electricity retailers; this resulted in established electricity retailers receiving an increased number of enquiries about acquiring customer portfolios from these smaller suppliers.

A few respondents also expressed the need for a guarantee programme during the energy crisis, where the state would provide loans with lower credit costs to electricity retailers, resulting in lower costs for customers. However, such a scheme was never introduced. To address the liquidity issue, some electricity retailers transitioned from post-payment to pre-payment models, while others opted to establish bilateral agreements with electricity producers to ensure access to more affordable credit.

The available contract types are the same for households and SMEs: spot-price, fixed-price, and variable-price. However, for SMEs, it is also common to have a power agreement that combines spot pricing and fixed pricing.

For households
Fixed-price contracts were available to household customers both before and at the beginning of the energy crisis, but demand for these agreements was low. Statistics show that the share of households who had a fixed-price agreement was 5% in June 2022, and very few entered fixed-price agreements as they were very expensive due to the high risk premium during this period. Most Norwegian households have tradi­tio­nally had spot-price contracts due to stable and low energy prices, and these con­tracts have been actively promoted, for instance by Forbrukerrådet, due to the spot contracts having the lowest average costs over time. There is also a small percentage of households that have variable-price agreements. Forbrukerrådet has actively warned households over these contracts, and their share has declined significantly due to high electricity prices. Before the energy crisis, around 20% of households had these contracts; as prices rose and the electricity support scheme was introduced, this figure reduced to around 5%.

There were also household customers who had entered into fixed-price contracts before the crisis. These contracts allowed customers to secure electricity at low rates compared to the spot price during the crisis, which was advantageous for consumers but proved to be catastrophic for the electricity retailers. In some cases, electricity retailers attempted to buy customers out of their favourable fixed-price contracts in exchange for a lump sum, an offer accepted by some household customers. In addition, some electricity retailers sold parts of their customer portfolios to different electricity retailers to avoid bankruptcy.

Fixed-price contracts were also available to household customers during the energy crisis to customers until the electricity support scheme was introduced, but these tended to be relatively expensive due to high and rising electricity prices. While there would have been considerable demand for low-cost fixed-price contracts when market prices were high, these were not readily available. Some electricity retailers described demand for fixed-price contracts during the early stages of the energy crisis; the fixed-price contracts they sold to households were secured against the system prices, but as the difference between the area price and system price increased, it eventually became difficult to offer such contracts. Some electricity retailers expressed that the change in the resource rent tax – making the tax based on the actual income of the power producer through the fixed price from the standardized contracts, rather than the spot-market price – should include contracts sold to households as well, not just businesses, thus enabling the electricity retailers to provide fixed-price contracts to households. The proposal originally included contracts for household consumers, but they were not included in the final proposal. The argument was that it was not seen as appropriate that household consumers entered into such long-term fixed-price contracts, given the high risks and large opt-out fees. Moreover, the introduction of the electricity support scheme, which created an electricity price cap for households, made it irrational for customers to purchase fixed-price contracts and thus almost completely removed the demand for these type of contracts.

For SMEs
Combination agreements are the most common contract type for SMEs, although fixed-price agreements exist and are used to some extent. These agreements often include a mix of fixed-price and spot-price components. These provide price hedging for a portion of the volume the customer purchases, while the remaining part of the electricity is purchased at spot price. There are also commercial customers who have chosen not to hedge their exposure to electricity prices and use spot agreements. These are typically businesses with low consumption, meaning that the cost of electricity has not been a determining factor for the company. There are, however, also some large customers who have relied on pure spot-price agreements.

For those customers with spot-price contracts, their electricity costs increased significantly in 2022. The Norwegian government introduced a temporary and limited electricity support scheme for businesses that was only available in 2022. Those SMEs that received electricity support were not allowed to distribute dividends and had a cap on how much money they could receive.

The government plan to help those businesses in an electricity market with volatile prices was to facilitate electricity retailers offering standardized fixed-price contracts to businesses, with contract periods of three, five, and seven years. This was achieved by introducing a contract exemption for electricity sold through these standardized fixed-price contracts, in which electricity is valued at the contract price instead of the spot price. Additionally, many electricity retailers offer these contracts with different profiles, such as seasonal and base load profiles, which some electricity retailers say have effectively addressed the majority of SMEs’ concerns.

To offer these fixed-price agreements to SMEs, electricity retailers establish agreements with power producers and act as intermediaries between the customers and the producers. The hedging agreements are with the power producers due to the non-liquid financial market. In these agreements, the SMEs take on the volume risk, while the power producer sets the price. To supply fixed-price contracts at a large scale to SMEs is challenging. First, it involves a substantial uncertainty premium in the price. For power production companies, managing numerous bilateral agreements with a multitude of electricity retailers requires a large amount of administrative work and is a barrier to the supply of fixed-price contracts.

Thus far, there has been limited demand for these contracts, and their effectiveness remains uncertain. Some market players express that the 3-5-7 years fixed-price contracts are too long and inflexible, which may not align with the needs of some businesses. Other electricity retailers express that there have been no complaints regarding their fixed-price contracts, and that the retailers can adjust the contracts to the business’s electricity usage profile. However, many SMEs are hesitant to enter a fixed-price arrangement due to their lack of understanding of the terms and conditions in fixed-price contracts. Moreover, with the current low prices in some areas, their willingness to enter into a fixed-price agreement is limited. Nonetheless, many businesses did secure themselves against system prices in 2021. Assessing how well the 3-5-7 years contracts have functioned will be easier once these contracts against system prices expire by the end of 2023 and these electricity retailers must enter into new contracts.

Some electricity retailers expect an increase in demand for fixed-price contracts because they believe businesses want predictability in budgeting, as opposed to taking bets in the market. This approach has traditionally been a focus for larger companies, especially those with higher exposure to energy prices. SMEs have typically considered spot prices or combination agreements as their best option. However, as the market expects increased volatility and high prices in the future, there are some expectations that businesses want to explore possibilities to reduce their risk exposure to the electricity market.

Challenges associated with offering fixed-price contracts
The shortage of liquidity in financial markets posed a challenge for the supply of fixed-price contracts to households due to the lack of hedging opportunities. The low supply of fixed-price contracts to households can also likely be attributed to reduced demand in the market as a result of the introduction of the electricity support scheme. The scheme introduced was, in reality, a cap on electricity prices for households, making it unreasonable for them to have a fixed-price contract. For SME customers, fixed-price contracts were available and more attractive than for the household segment, and most businesses chose to hedge at least half of their portfolio through fixed-price agreements. The 3-5-7 contracts were also established during the energy crisis through the introduced contract exception for electricity, making fixed-price agreements for between three and five years available to SME customers.

Electricity is the most important source of heating in Norway (48%), followed by heat pumps (30%; Figure 8‑6). Some households also use biofuel and district heating, whereas almost none use gas. As much as 23% of households do not know their electricity consumption per year. The electricity consumption of households in Norway varies, but the average is higher than the other Nordic countries: 35% of households reported that they use 10,000–24,999 kWh per year (Figure 8‑7).

Note: The graph shows the most important source of heating in the household. Survey conducted in October and November 2023 amongst Norwegian households. N=1483.

Note: The graph the reported yearly electricity consumption. Survey conducted in October and November 2023 amongst Norwegian households. N=1195.

Although electricity is generally a low-interest product in Norway, public awareness has increased due to high electricity prices, which in turn has affected the mobility of customers. In the survey, respondents were asked about issues related to comparing and switching contracts, including challenges experienced, if the respondents felt well informed, and other relevant issues.

Figure 8-8 illustrates that 49% of respondents have engaged in either switching or comparing electricity contracts in the preceding 12 months. This suggests that Norwegian consumers are for the most part active, which supports the notion that the Norwegian electricity retail market is functioning well.

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 2023 amongst Norwegian households. N=1195.

The respondents who reported challenges when switching or comparing contracts had one or multiple reasons for the difficulties they encountered. The results emphasized two main challenges: the complexity of comparing contract terms and the difficulty in distinguishing between various contracts. Additionally, understanding the contract terms and conditions posed a significant challenge. Respondents also mentioned struggling to find information and relevant contracts and sellers.

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 Norwegian households. N=585.

Among the respondents, 40% reported feeling well-informed, while 20% felt somewhat informed when it came to switching or comparing contracts. 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 are able to grasp the necessary information to make an informed decision, but that the process may be unnecessarily difficult and time-consuming.

Note: The graph shows how well-informed respondents who have recently switched or compared contracts felt. Survey conducted in October 2023 amongst Norwegian households. N=585.

Half of the respondents who had compared contracts ultimately chose not to switch. While these individuals mentioned various reasons for their decision, the majority (74%) stated that their primary reason was the lack of considerable savings associated with switching (Figure 8‑11). Furthermore, 9% of respondents chose not to switch due to the lack of reliable information and difficulties in comparing contracts. This reason was highlighted by the respondents as the main challenge when comparing or switching contracts (Figure 8‑9). Lastly, 5% of respondents said that their reasons for not switching were both the difficulty of the switching process and the perceived risk of switching relative to potential savings.

Note: The graph shows why those who have compared but not switched contract, ultimately chose not to switch. Survey conducted in October 2023 amongst Norwegian households. N=277.

The Norwegian market has been characterized by high mobility, with approximately 20% of households and 10% of businesses switching suppliers in 2022.

https://www.nve.no/reguleringsmyndigheten/publikasjoner-og-data/statistikk/statistikk-over-sluttbrukermarkedet/leverandoerskifter-markedsandeler-og-leveringsplikt/. Date: 29.11.23

The switching rate was also relatively high prior to the energy crisis compared to other Nordic countries. However, a substantial proportion of consumers have refrained from switching and comparing contracts for various reasons. The survey results show that the primary reason is the high level of satisfaction with existing contracts (Figure 8‑12). The second most prevalent reason is the perception of limited potential for savings in a new contract. Other reasons mentioned were that it was hard to find information on contracts and sellers, as well as the switching process seeming both complicated and time-consuming.

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 Norwegian households. N=69.

According to statistics from NVE, around 600,000 households switch contracts each year, but the context for switching varies between consumers.

https://www.nve.no/reguleringsmyndigheten/nytt-fra-rme/nyheter-reguleringsmyndigheten-for-energi/totalt-byttet-norske-husholdninger-stromleverandor-nesten-600-000-ganger-i-2019/. Date: 30.11.23

Here, 40% of those who had switched contracts did so as a result of actively seeking a new contract, while 30% did so because they were moving (Figure 8‑13). Around 10% of the respondents report that they switched contracts because they were contacted by a seller. Win-back sales are also a commonly employed strategy by electricity retailers, with a notable 46% of consumers reporting that they were contacted by their previous supplier after switching to a new one (N = 243). Of these respondents, 9% accepted their former supplier’s offer. This may suggest that households are adept at identifying competitive electricity contracts, or that price competition is so tough that electricity retailers have little room to lower their prices with the aim of winning customers.

Note: The graph shows the context for having switched contract. Survey conducted in October 2023 amongst Norwegian households. N=308.

The survey reveals that the main motivation for switching among those who had already switched contracts was that the new contract offered a better price. This is in line with how 75% of households responded that the reason for not switching was that there was little money to save (Figure 8-11). Overall, this indicates that consumers are drawn to low prices, giving suppliers an incentive to compete on price. Among other reasons, around 5% report that their motivation for switching was negative experiences with their existing retail supplier, with a similar figure for those wanting access to new services.

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 2023 amongst Norwegian households. N=308.

The most important source of information the respondents used the last time they switched or compared contracts was an online comparison tool (Figure 8‑15). Of those who did not switch or compare contracts during the last 12 months, 39% reported that they would likely use an online comparison tool if they were to compare contracts in the future. On the other hand, within the same group, 38% reported that they were not familiar with any online comparison sites. Ultimately, this implies that the efficiency of the market depends on a price comparison service providing relevant information, and consumers feeling well-informed about these services.

The second most important source of information when switching contracts is recommendations from friends, family and other people they trust. For comparing contracts, the second most important source of information is the internet.

Note: The graph shows the most important source of information the last time the respondent switched or compared contracts. Survey conducted in October 2023 amongst Norwegian households. Switched contracts: N=187. Compared contracts: N=277.

Electricity has previously been seen as a low-interest product in Norway due to it being a homogenous product and prices historically being low and stable. That said, there is some evidence that rising energy prices have contributed to increased general customer awareness in the Norwegian market, although the survey indicates that the market is still characterized by a significant group of inactive consumers.

There is a consensus among the interviewed actors that considerable information challenges still exist in the Norwegian electricity retail market, making it difficult for customers to compare products and make well-informed decisions. Different contract types and bundling with other products can make contracts difficult to compare, and contracts are constructed in different ways, making it difficult for a consumer to ensure that there are no hidden terms of which they are unaware. When Forbrukertilsynet performed controls on the 20 largest electricity retailers in March 2023, they found violations by all of them, including the following:

Some actors have also been sceptical of the design of the price comparison portal strompris.no. This relates to the fact that the contracts listed on top are often those with a time-limited low price (markup). Changes have, however, been made to the portal: Previously, contracts with a low markup for a very brief period could be listed on top, now the period for a low markup must longer. As of October 2023, the spot contracts on top of the portal must guarantee the markup for at least 12 months.

Although there still seems to be considerable information challenges in the Norwegian electricity retail market, several of the interviewed actors have observed that these problems have been reduced in recent years. This is likely due to a combination of changes in regulations and industry standards, increased enforcement of existing regulations, and a general increase in public awareness around the electricity retail market.

The industry standard Trygg strømhandel was established in 2020. Both prisopplysningsforskriften and avregningsforskriften were changed in 2022, with increased obligations regarding the information the electricity retailers can use in their marketing, contracts, and invoicing.

https://www.fornybarnorge.no/nyheter/2021/24-stromleverandorer-sertifisert-for-trygg-stromhandel/. Date: 24.11.23

Forbrukertilsynet has been given increased sanctioning opportunities since October 2023, and they have also monitored the electricity retail market more closely in recent years, for instance with the controls in March 2023. The increase in sanctioning power follows from the implementation of the EU’s modernization directive in Norway and applies to the Marketing Act and the Right of Cancellation Act. The new rules strengthen consumer protection and set clearer requirements for businesses.

https://www.forbrukertilsynet.no/nye-reglar-styrkar-forbrukarvernet

It was noted in our interviews that the regulations are demanding for the electricity retailers to understand, so they also work to guide the retailers in this respect. Thus, several changes have recently been implemented to address information asymmetry in the electricity retail market, the full effect of which has not yet been felt.

Furthermore, the government announced in September 2023 that they planned to hold a hearing in October 2023 regarding further measures to respond to these challenges. 

The Norwegian market offers a wide supply of spot contracts with varying markups and other price elements or product bundles. Although the market for spot contracts can be somewhat confusing for consumers, several spot contracts are available with no other price elements than a relatively low markup and possibly a fixed monthly fee. There is, however, a limited supply of fixed-price contracts for household consumers.

As of October 2023, three fixed-price agreements are available at strompris.no.

Fixed-price agreements can result in higher costs over time compared with spot contracts, for instance, depending on how the customer adjusts their electricity consumption according to the spot prices. However, for many consumers, the fact that the price is stable is more important than having the lowest average price. Although the current electricity support scheme reduces the risk of high price volatility for consumers, there are few alternatives for those who prefer contracts with stable prices.

The non-household consumers in the electricity retail market are described as a particularly vulnerable group. Many of these consumers are, in practice, the same people with the same information and awareness of the electricity retail market as the household segment. However, the non-household segment has significantly fewer consumer rights than households, and they are not necessarily aware that they have fewer consumer rights as a non-household consumer. Fixed-price agreements, or agreements with fixed-price elements, have traditionally been more prominent in the non-household segment. The supply of such agreements became limited when electricity prices increased. In November 2022, the government introduced measures to boost the supply of fixed-price agreements to non-household consumers; however, the available statistics indicate that few companies have entered into these agreements.

https://www.altinget.no/arbeidsliv/statsradensvarer/9980

Note: The graph shows how respondents receive the bill from their electricity supplier. Survey conducted in October and November of 2023 amongst Norwegian households. N=1195.

Almost all respondents report that they receive their electricity bills electronically (Figure 8‑16). Among the respondents seeking information on their electricity bills, two specific aspects of the invoice were highlighted (Figure 8‑17): 80% were interested in the amount to be paid, while 50% were interested in information on the price elements upon which the bill is based. Subsequently, 40% of respondents pay attention to information regarding their estimated yearly and/or historical consumption, while 30% focus on details about changes that may impact their electricity bills.

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 Norwegian households. N=1195.

For 80% of respondents, the preferred method of receiving notifications about changes to the electricity contract or other relevant aspects is via email, followed by text messages at 40% (Figure 8‑18).

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 Norwegian households. N=1195.

In summary, much is heading in the right direction in the Norwegian retail electricity market. Customers have gained greater awareness and knowledge of the market, assisted by simpler contracts that make it easier for households to understand price elements and the terms and conditions in their contracts. Furthermore, several retailers have recently begun marketing themselves as being trustworthy and predictable by offering only one contract and promising not to make any changes to them. The primary challenge, however, may lie in the fact that a sizable group still exists with low interest in the market.

The electricity retail market has for a long time been considered a market with relatively high levels of customer dissatisfaction compared to other markets. Forbrukerrådet received 3,450 enquiries regarding the electricity retail market in 2022, an increase of 70% compared with 2021.

https://www.forbrukerradet.no/siste-nytt/forbrukerradet-nedringt-av-fortvilte-stromkunder/

This is the market with the second highest number of enquiries. Specifically, enquiries were related to unjustified cancellation of fixed-price agreements, requirements of prepayment, high electricity bills, and the lack of withdrawal rights. Furthermore, Elklagenemda received 1,200 enquiries in 2022, double the figure from 2021. More than half of these complaints were related to the electricity retail market.

https://www.elklagenemnda.no/contentassets/15b3423413004d85aabdb18ab707580f/arsmelding-2022-elklagenemnda.pdf

Most of these complaints were related to consumers questioning terms in the agreements they had made; 40% stated that they felt cheated one or more times when buying electricity in a survey from 2022.

Forbrukerrådet. 2022. “Strøm og strømleverandører – kunnskap, erfaringer og holdninger i befolkningen»

Approximately 50% of the survey respondents report having negative experiences with their retail supplier, and 40% report negative experiences not related to pricing. The survey results show that the main problem for the customer was that prices were much higher than expected (Figure 8‑19). This may, however, not have been the electricity retailer’s fault but rather the development of the electricity price in the market. The second most prevalent problem is that billing was hard for customers to understand. Other problems mentioned were related to contract terms, misinformation, and difficulty in reaching customer service.

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 Norwegian households. N=1194

The households’ response to their negative experiences varied. In the survey, we have chosen to exclude those who justified their negative experience by stating that the price was higher than expected. This is because this issue for the most part is related to the development of the spot price in the market and not the electricity retailers specifically. Among those who had other reasons for having a negative experience, 41% reported taking no action. Approximately 30% switched to a different supplier, while around 20% chose to complain to their electricity retail supplier (Figure 8‑20).

Note: The graph shows action taken by consumer in response to a negative experience. Survey conducted in October and November of 2023 amongst Norwegian households. N=612.

Information is lacking when it comes to customer satisfaction in the non-household segment. However, a 2022 survey on the satisfaction of Norwegian electricity customers shows that non-households were less satisfied than households. The electricity support scheme is likely to be one of the reasons for this difference in satisfaction levels.

https://www.epsi-norway.org/wp-content/uploads/2023/06/Stromstudien-2022.pdf

It was noted in the interviews that many enquiries were submitted by SMEs needing guidance, and with questions on the same topics as the household consumers, such as contracts being difficult to understand or being wrongly invoiced. However, since non-household customers do not have the same rights as household consumers, they need to contact lawyers to receive help regarding these issues (or resolve the problem themselves).

In general, the increasing number of enquiries and complaints can be related to both an increase in the actual level of illegal behaviour from the electricity retailers and an increase in the customer awareness that makes consumers more able to identify illegal behaviour. While we do not have evidence to say that there has been an increase in the actual level of illegal behaviour in the electricity retail market, increased customer awareness and media attention have likely contributed to this increase. Some market players also express that dissatisfaction towards electricity suppliers is related to high electricity prices, and in that sense to customers not understanding the market. The high electricity prices increased the need for information and regular updates from the electricity suppliers, which also increased awareness regarding electricity saving.

https://www.epsi-norway.org/wp-content/uploads/2023/06/Stromstudien-2022.pdf

High electricity prices have contributed to increased customer awareness in the electricity retail market. Electricity has shifted from being a low-interest product that made up only a minor part of most household budgets to a topic of widespread media attention, for instance, around high costs for consumers. This increased media attention, along with the actual high costs for consumers, has likely resulted in more consumers delving into the details of their electricity agreements. According to several of the interviewed actors, there has been an increase in consumers noticing that they paid for additional products of which they were previously unaware.

Although high electricity prices have likely contributed to increasing customer awareness, the energy crisis has not necessarily contributed to increased mobility in the electricity retail market. The share of consumers that change electricity retailer each year has remained relatively stable at 20–25% in the household segment, and 10–12% in the non-household segment, over the past five years.

Leverandørskifter, markedsandeler og leveringsplikt (nve.no)

There has, however, been a change in the composition of contracts. For households, spot contracts have been the dominant contract type for several years and have become even more prominent as electricity prices have increased. In particular, the already low share of variable contracts has been further reduced.

The increase in spot contracts may seem somewhat counterintuitive at first, since spot contracts are the contracts with the highest degree of volatility and have historically had high markups. Several factors have likely contributed to this shift. First, variable-price contracts are not particularly transparent, and Forbrukerrådet have for years warned the public about these types of contracts and recommended spot contracts instead. Second, the electricity support scheme for households has contributed to reducing the volatility related to spot contracts. Third, together with increasing energy prices came a greater focus on cost-saving measures related to electricity, such as moving consumption to cheaper hours. There is evidence that high electricity prices have contributed to both a reduction in total household electricity consumption and a move to shifting consumption in line with energy prices.

(Dalen og Halvorsen 2022) and (Tangeland et al. 2022)

The energy crisis has led to increased prevalence of innovation that allows the connection of self-produced electricity to regular electricity. Customers have installed various solutions to reduce their use of electricity and make their usage more flexible as prices have increased. Examples include solar cells, heat pumps, smart charging of EVs, and apps to monitor electricity use and react to price signals. Traditionally, electricity has been seen as a low-interest, homogeneous product, with prices historically being low and stable. Customer awareness regarding electricity prices has since increased, but this may change if prices fall and/or become stable again. Nonetheless, the increased knowledge among some customers and the installation of different solutions to monitor and react to price signals may contribute to a longer-lasting effect on costumer awareness and response to electricity price changes.