District heating prices set to rise before winter

District heating will cost more next winter than it did last year, with rising wood-chip prices among the main reasons, ERR reported. The exact prices for the new heating season will become clearer in the coming months.

The Competition Authority’s preliminary assessment is that wood-chip prices are likely to rise. Wood chips are the main fuel in most district heating networks in Estonia.

“Heating companies sign wood-chip supply contracts for the heating season between around June and September, so the relevant information is still reaching the authority,” Kertu Saul, head of the authority’s price regulation service, told ERR.

The impact of higher wood-chip prices on district heating will depend on the specific network and the contracts in force there. The Competition Authority said higher fuel costs would therefore not automatically result in the same increase in district heating prices everywhere.

Adven business director Raivo Melsas gave an example of how much prices could rise from September. Adven is one of Estonia’s largest energy and heating companies and operates in 14 district heating networks.

“In Adven’s case, the average price increase is about seven percent, or an average increase of 5.8 euros per megawatt-hour across all the areas,” Melsas said.

Prices will mostly rise by between three and 10 percent in Adven’s networks. Kostivere is an exception, where prices will fall by 30 percent, Melsas said.

He attributed the decrease to cooperation with the local government, which allowed Kostivere’s network to be merged with the Loo district heating network. Prices in Loo did not rise as a result because Adven also agreed with the local government to reduce rental charges.

Melsas, like the Competition Authority, said the main reason for the price increases was the higher cost of wood chips.

“Wood-chip prices have risen, and the root cause is still the impact of fuel prices. Transporting wood chips, bringing them out of the forest and forestry work all require motor fuels,” he said.

In addition to wood chips, rising natural gas prices could affect district heating costs this winter. Adven mainly uses gas during periods of peak winter demand. The company said gas prices had risen recently and could begin affecting district heating prices in October.

According to the Competition Authority, the overall impact of natural gas prices on Estonia’s district heating remains smaller because gas is used in about one-fifth of heating networks, mostly as a supplementary fuel.