Distribution Network Operator

According to Electricity Market Act the electricity network operator is an electricity undertaking engaged in the provision of  network services through a network. Distribution network operator is electricity undertaking engaged in the provision of network services  through a distribution network.

In Estonia there are a total of 40 different distribution network operators. The market is characterized by high levels of concentration because the total number of customers of all other distribution network operators except Jaotusvõrk LLC belonging to Eesti Energia Ltd group is less than 100 000. The largest of these are Fortum Elekter and VKG Elektrivõrgud.

Each distribution network operator has its own service area which includes one or more delimited territories. It is important that the service areas do not overlap, but the operators have the right to change the areas by mutual agreement so that the covered area before changes would be covered after changes as well.

The fundamental obligation of a distribution network operator is to sell electricity to market participants connected to its network at price approved by Estonian Competition Authority. Approved sale price must cover the presumed average purchase price of electricity purchased for the performance of the selling obligation and the expenses incurred in the performance of these obligations  and also ensure a reasonable return on invested capital.

The main activities of a distribution network operator are:

·         Development and reliability assurance of the network through investments and maintenance.

·         Collection of measurement data and calculation of consumption and its efficiency.

·         Minimization of network losses (both technical and commercial)

·         Fair price formation and coordination with Estonian Competition Authority to ensure a reasonable rate of return on investments.

According to Electricity Market Act consumers who do not qualify as eligible must buy electricity from their distribution network operator or the seller designated therby and the electricity must be produced either in Narva Power Plants Ltd, by cogeneration of electricity and heat or by small producers (capacity less than 10 MW). Currently most of the electricity is bought from Eesti Energia Ltd as a designated seller, only a few network operators are using the above-mentioned possibility to buy electricity directly from Narva Power Plants.   

Nordic Power Management provides information regarding various possibilities to purchase electricity, solutions and entire electricity portfolio management. Although the distribution network’s business is a monopolic one, and thus regulated business, there are several important activities to ensure the economic success and here our company can be a value adding partner. We believe that by thorough analysis is possible to find the economically best solution which represents the interests of the network operator.