Electricity production and transmission
Electricity is produced by power plants operated by nuclear, hydro or wind power or various fuels. There are approximately 120 companies and 400 power plants producing electricity in Finland.
Main grids and distribution networks transmit electricity from power plants to private homes and other users. Fingrid Oyj is in charge of the transmission of electricity over the main grid. The main grid transmits electricity from producers to electricity distributors and industrial companies. Electricity distribution companies distribute electrical power to homes and businesses over medium and low voltage distribution networks.
Electricity distribution in short
Regulation of electricity distribution
The Finnish electricity distribution market is strictly regulated and monitored. The purpose of the Finnish Electricity Market Act is to ensure the reliability of supply, competitive prices and effective and equal service practices to end users.
As an electricity distributor, Caruna operates under network licences granted by the Energy Authority. The Energy Authority monitors the operations of electricity distributors and defines an allowed reasonable rate of return for the distribution of electricity. Electricity distributors then use this value as a basis for their distribution prices.
All electricity network trade is regulated by the Electricity Market Act. It is based on the premise that electricity networks constitute a market place for producers and users, that, on equal and reasonable terms, offers services to all electricity trade parties, both suppliers and buyers. Network operators, such as Caruna, are required to utilise, develop and maintain their networks in accordance with the needs of the electricity market, and thus secure the functionality and reliability of the electricity distribution system from their part. Network operators are also required to offer customers a network connection and electricity distribution on equal and reasonable terms.
Data management is likewise an important element of all electricity market activities. Caruna is under a specific, statutory obligation to remain impartial and to share all necessary data between all market parties, but on the other hand, we are also tied by the regulations on handling personal information. One of these regulations specifies that consumers must always have the right to manage any information concerning them.
The Electricity Market Act was amended in 2013, with the aim to improve the security of electricity supply.
The Electricity Market Act was amended in 2013, with the aim to improve the security of electricity supply. The Act specifies that service interruptions caused by storms or snowfall must not exceed six hours in urban areas or 36 hours in any other areas.
All electricity network operators are required to improve their reliability of supply to ensure that outages do not exceed the time limits defined in the Act after 2028. For Caruna, this means significant investments into improving the reliability of supply, for instance, by replacing overhead lines with cables underground and by increasing network automation. Other investments are necessary because aging network structures need to be renovated.
Monitoring of electricity distribution prices
The Energy Authority monitors the revenues of electricity distributors in four-year regulatory periods. If the revenue from any regulatory period exceeds the limit of reasonable return defined by the Energy Authority, the company accrues overincome. If, on the other hand, the revenues realised during a period remain below this limit, the company accrues underincome.
Caruna defines its electricity distribution prices by estimating a certain level of return and expenses.
Caruna defines its electricity distribution prices by estimating a certain level of return and expenses. There are several factors influencing the amount of expenses, such as the inflation, interest rates and weather conditions, for instance. Therefore, the estimates are rarely realised precisely as they are.
Should the amount of collected electricity distribution fees remain below the predicted level, Caruna may charge more fees during the following four-year period. If, however, the customers have been overcharged for electricity, Caruna credits the excess to customers during the following period.
Electricity networks in the future
We always strive to develop our services so that they can respond better to the expectations of our customers and the changing needs of the society. New technologies, such as energy reserves and wide-scale decentralised energy production, are going to change the tasks and business models of network operators in the future. Smart meters are a good example of changes brought about by new technologies. We installed these meters before the end of 2014, and they allow the customers to purchase electrical power by the hour and monitor their consumption at Caruna’s energy reporting service.
Smart meters are a good example of changes brought about by new technologies. We installed these meters before the end of 2014.
The smart grid working group organised by the Ministry of Economic Affairs and Employment is looking for ways to improve the involvement options available to customers. The working group intends to draw up electricity network design and construction guidelines that would ensure customers are able to be more actively involved in the electrical power market by, for instance, selling the electricity they generate with their small-scale production equipment.
Caruna’s role in the working group is to act as a technical advisor and provider of services and solutions that answer the customers’ needs. The working group is to present their guidelines for the future of the entire Finnish electricity grid in an official report in the autumn 2018.
In addition to planning for the future, we at Caruna are building a strong foundation for future energy markets, thanks to our network improvement projects which are already underway. Our current network construction principles enable a large-scale and cost-effective connection of renewable energy sources to our network. Smart meters, in turn, allow the customers to sell any electricity they are not using.