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Lithuania Defends Nordic Power Pool After Price Spike

Sept. 12 (Bloomberg) -- Lithuania condemned Estonia’s plans to bypass a new joint electricity market to protect its consumers as members of the Nordic power exchange disagree on the causes of price spikes earlier this year.

“The current mechanism for the distribution of capacity, when Nord Pool Spot auction is applied to trading on the exchange, can give a large benefit to the market players,” Lithuanian Energy Minister Jaroslav Neverovic said in an e-mailed statement yesterday. “Unilateral actions that Estonia plans, such as renewing auctions of forward capacity at the Estonian-Latvian border, would hurt competition in the Baltic power market.”

Estonian Economy Minister Juhan Parts said in a letter last month the nation may revert to allocating transmission capacity independently at the Latvian border instead of through the Nord Pool Spot exchange. Estonia’s competition watchdog must look into “abnormal” market prices, Parts said in June after day-ahead power prices in all three Baltic countries soared 61 percent.

Parts urged his Baltic counterparts in the letter to offer all output to the exchange, similar to Estonia’s Eesti Energia AS, to avoid price jumps.

The Baltic power exchange is hindered by the lack of transmission links between the Baltic and Nordic countries, Neverovic said. Completion of new lines between Estonia and Finland, Lithuania and Sweden, and Poland and Lithuania in the next two years “will bring a significant reduction of price fluctuations,” he said. He urged Estonia and Latvia to lay a new power line as quickly as possible to reduce congestion.

Connecting Baltics

In March, the Baltic grid operators agreed on terms for managing regional flows of electricity, after a dispute threatened to delay their final integration to the Nordic power exchange. Connecting the Baltics to power markets and networks in neighboring EU countries is a priority for the European Commission.

Until Latvia joined the Nord Pool Spot in June, Lithuania remained isolated as it only has cross-border connections to Belarus and Kaliningrad, Russia, with none to the Nordic or EU power markets. Lithuania has relied on Russian electricity since closing its Soviet-era Ignalina nuclear plant in late 2009 while its gas-fired electricity plants are idled because prices are uncompetitive.

To contact the reporters on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net; Bryan Bradley in Vilnius at bbradley13@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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