Souda Municipality Badly Misses Electricity Price Forecast - Now They Have to Cut - NRK Rogaland

– No, we did not get the expected return. We assumed an electricity price of three kroner per kWh, says Asbjørn Birkeland (Sp), mayor of Sauda municipality.

– What is the price so far?

– 1 krone and 20 øre … that’s significantly less.

This has consequences for the electricity municipality. In the municipality’s budget for 2023, the sale of licensed electricity was the largest source of income.

In total, the municipality needs to collect NOK 240 million in 2023.

For 2022, Souda municipality budgeted NOK 30 million. So 2023 is scheduled to bring in 8 times more than you thought would be available in 2022.

It doesn’t seem so.

From “silk feöre” to budget cuts

“With projections for the coming years, it is tempting to talk about Silk Roads,” was the introduction to the economic plan presented last fall.

The current municipal director, Vegard Thies, cannot use those words regarding the current situation.

Now the municipality has to reduce the budget, while at the same time increasing the income.

– Low electricity prices will reduce our expected income by around NOK 70 million, says Thiesse.

If electricity prices remain at the same level as they have been so far this year, revenues will decrease by NOK 70 million. The municipal director wonders if the starting point should be even lower electricity prices. One kroner per kWh would reduce income by around NOK 80 million.

But the question is whether it is too promising.

Electricity Analyst: – Prices will come down

Leanne Hagen, power analyst at Value Insight, expects prices to drop further in 2023.

– 2022 is a special year. The Nordics initially had a special resource situation, the green transition, and then we went to war, which reinforced the price effect, he says.

At the end of last year, and in 2023, the situation has changed significantly. Hagen points to several factors contributing to the drop in electricity prices.

Consumption in the Nordics and the rest of Europe has declined as a result of higher price levels in 2022. This has also led to low activity and energy efficiency in the industry. Consumption is expected to pick up again from the end of 2023.
The resource situation in both water and ice reserves is particularly good in southern Norway.
Productivity generally improved throughout the year in Europe.
Winters were mild in many places, reducing consumption.

– Towards the summer, i.e. in the second quarter, we expect an average price of 65 euros per megawatt hour, says Hagen.

If you convert this to øre/kWh, it is approximately 73 øre per kWh. In the third quarter of the year, the block expects a price of 66 øre per kWh, and 88 øre in the fourth quarter.

The figures apply to the entire country. Hagen believes that prices in southern Norway will not increase the average, but rather fall below the indicated prices.

– There are good stores for water and ice. Especially in southern Norway, Hagen says.

It may also affect the economy of Souda Municipality. However, even though the constituency already exists, Hagen doesn’t want to criticize Souda or other municipalities FVN in December In 2023 prices will be less than three kroner per kWh, let’s say. For example, he points to two weeks of high electricity prices in early December before they began to decline.

– It is important that you see how the situation is going forward and the overall picture. Hagen says the situation in August last year was very good.

The government also failed

Lower-than-expected electricity prices could also lead to an additional financial blow to Souda Municipality.

Last year, the government announced cuts in structural subsidies to municipalities that benefit from large electricity revenues. For Souda, the cut was initially NOK 107 million. Amount calculated based on the government’s assumption of an average price of two kroner per kWh. This is more than the electricity bill this year.

The amount by which electricity municipalities’ structural subsidy will be cut will most likely be adjusted in the revised state budget to be presented in May.

– Many municipalities in southern Norway have been hit hard with structural subsidies, says Jan Rolf Naas, president of the national association of Vaskraftkommuner.

He believes this applies to many power municipalities in eastern, western and southern Norway.

– Municipalities started paying in January. If this is transferred to the revised national budget, it means you have overpaid the treasury for five months, says Næss.

But none of this need have been a problem for Souda Municipality. If they hit the math.

But how did three kroner per kWh come about, when experts and the state believe in low prices?

– backwards

– By the time the budget was tabled, people were used to higher electricity prices. The then-municipal director and inspectors agreed, Mayor Birkland says, and none of the politicians questioned it.

– Do you regret it now?

– Hindsight is the best knowledge. In any case, we should have adjusted to two kroner per kWh in December.

The mayor hoped that the municipality would leave several difficult priorities in 2023 after several difficult fiscal years for the municipality of Souda.

– It is not easy to predict electricity price. It’s stupid that you save things and replace them cheaply. Shakti Revenue could have changed this the other way around. But it also shows that Souda Municipality needs to make itself more independent from electricity revenue in the future.

– Expecting higher electricity prices?

– No, I can’t say that. For most people, Birkeland says, having lower electricity prices is a good thing.