The Energy Regulation and Markets Review - Stikeman Elliott

Norway
The fixed component is a fixed annual amount and shall, at minimum, cover
customer-specific costs. These are costs related to metering, settlement, invoicing,
etc. This component is independent of the current input of power and will give grid
companies sufficient income according to regulated permitted income fixed annually for
each company by the NVE. The central grid input tariff will be normative for the fixed
component by power input into regional and distribution networks.
The energy component depends on the customer’s current input of power. When
power is transmitted some of the power is lost. The energy component reflects costs
(kroner per kWh) related to power loss when one extra kWh is transmitted (marginal
loss). The energy component refers to the connection point.
In addition, the transmission tariff (i.e., fixed component plus energy component)
covers the fixed costs in the network.
iv Security and technology restrictions
As a result of increased fear of terrorism around the world and climate change, the
authorities have increased focus on security of supply in the energy sector.
On 22 July 2011 Norway was struck by a major act of terror where a huge explosion
damaged the buildings housing the government, among them the Ministry of Petroleum
and Energy. Later, during last winter several parts of Norway were struck by storms that
took down the electricity grid in many places. More than 421,000 people were without
electricity for some time during the Christmas period as a result of storm Dagmar. This
lasted for several days for more than 10,000 people. This has led to an increased focus on
transmission tariffs and the grid companies’ duty to maintain the quality of the grid.
IV
ENERGY MARKETS
i Development of energy markets
The Nordic countries’ power systems are interconnected, and the countries’ systems are
mutually dependant. The power price is determined in the market based on generation,
transmission and consumption conditions in the Nordic region, and thus both short and
long-term prices will vary. The power price also reflects possible congestion in transmission
capacity between the areas, but the price will be the same in all areas of the Nordic region
if there are no such congestion. Water inflow to hydropower plants is of great importance
for the determination of the power price, since hydropower represents such a large share
of the Norwegian and Nordic power supply. In Norway, consumption is slightly higher
than the power production in years with normal precipitation and temperature conditions,
which means that Norway is dependent on imports from abroad. In years with low inflow,
the need for power imports is even higher. Temperature and weather conditions influence
short-term demand in the Nordic region and Europe, which also affects the power prices.
Periods of cold temperatures and high demand can especially result in higher power prices.
Wholesale market
The power market is often divided into wholesale and end-user markets (retail market).
The wholesale market embraces generators, suppliers, large industrial enterprises, traders
and other undertakings. Electricity is traded physically on a day-ahead basis in the spot
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