Electricity transmission and distribution services in Finland are considered as a natural monopoly, with operations subject to licence pursuant to the Finnish Electricity Market Act. The Energy Authority is responsible for granting licences and monitoring compliance with the legislation. Electricity network operations and services include legal obligations, chief among which are the obligation to develop the electricity system, along with the obligation to connect to the system electricity consumption sites and power generating installations, and the obligation to transmit electricity. The Energy Authority supervises network operators’ compliance with these obligations.
As of 1 January 2005, monitoring the fairness of electricity transmission pricing has been implemented through a monitoring model based on regulatory periods and defining the criteria for the reasonableness of pricing in advance. The length of the subsequent regulatory periods has been set at four years. The current period runs from 2016 - 2019 and the next one will be 2020 - 2023.
The aim of the legislation is to ensure reasonable pricing for electricity consumers and to give electricity network operators the opportunity to continuously improve their services and operations. The monitoring model is designed to encourage the development of better services to meet the day-to-day needs of people as well as the requirements of society. The Energy Authority supervises all electricity distribution network operators, of which there are approximately 80 in total, in Finland. Electricity users do not need to submit requests to determine the fairness of network operators’ distribution pricing.
After the regulatory period, the Energy Authority calculates the total return on network operations for each network operator and compares this figure to the permitted rate of return. The current regulatory period also includes incentives for electricity network companies related to criteria such as investments, innovation, quality and operational efficiency, which can be used by operators to increase their permitted reasonable rate of return. The permitted reasonable rate of return is tied to the 10-year government bond interest rate.