Finland Should Boost Monitoring of Power Market, Gaia Says

Finland needs to strengthen its monitoring of the country’s concentrated power market as heavy manufacturing industries increasingly suffer from soaring electricity prices, consultant Gaia Group Oy said.

Over the past six years, electricity in Finland has cost 9 percent more on average than power in the Nordic area as a whole, adding 350 million euros ($465 million) in costs for energy-intensive industries last year, according to Iivo Vehvilaeinen, leading consultant at Gaia in Helsinki.

This has boosted expenses for Finland’s energy-intensive pulp, chemicals and basic metals industries, which contribute twice the European average to the economy, according to the International Energy Agency. The northern European country lacks the oil and hydropower supplies of neighbors Russia and Norway, while industries represent half of the country’s electricity consumption, according to data from the Finnish Energy Industries lobby group’s website.

“This begs the question whether market monitoring and consumer protection need boosting,” since concentrated ownership of power production capacity enables the biggest generators to use strategic bidding to increase market prices, Vehvilaeinen said by phone on Jan. 15.

Antitrust Concern

Based on the market share of Finland’s biggest power producers, including Fortum Oyj and Pohjolan Voima Oy, Finland has a so-called Herfindahl index of 3,326, an international benchmark used by competition authorities to measure market concentration in antitrust cases, according to the report. The U.S. Department of Justice considers a market with a result 1,800 or greater to be a highly concentrated marketplace.

From 2007 through last year, power bought and sold on Nord Pool Spot AS’s energy exchange in Oslo cost as much as 6.29 euros a megawatt-hour more in Finland than the average Nordic price, while the differential last year increased to a five-year high of 5.44 euros, from 2.25 euros a year earlier, according to data from the exchange.

There is no immediate need to intensify market scrutiny in Finland, Riku Huttunen, director general of Finland’s Energy Market Authority, which monitors power and natural gas markets, said by phone from Helsinki yesterday.