Appeals board overturns ISK 1.4bn fine against Landsvirkjun

An appeals board has overturned a competition authority decision that fined Icelandic power company Landsvirkjun ISK 1.4 billion. In a contributed article published by Morgunblaðið, the company’s chief executive, Hörður Arnarson, criticises the authority’s handling of the case.

The case concerned Landsvirkjun’s bids in Landsnet tenders for electricity to cover transmission losses from 2017 to 2021. After an investigation lasting several years, the Competition Authority concluded that Landsvirkjun had sold electricity to Landsnet at too low a price and imposed the fine. Arnarson says the appeals board has now overturned that decision.

Arnarson describes Iceland’s electricity system as unique: it runs entirely on renewable energy and is not connected to other electricity systems. He says it is reliable and among the most cost-effective systems of its kind. Competition in electricity generation and sales was introduced in 2005, following a European model, and has benefited consumers, he writes.

He says it remains difficult to ensure the country’s energy security within the European-style market. Landsvirkjun has prioritised supplying households and smaller businesses, which buy about four terawatt-hours of electricity a year on the wholesale market. The company’s annual sales into that market have ranged from 1.5 to 2.5 terawatt-hours, depending on how much other power companies choose to sell.

Arnarson says Landsvirkjun must avoid selling more electricity to heavy industry than the system can supply. For more than a decade, the company has urged the government to pass laws guaranteeing energy security for the general public, a provision he says was missing from the 2005 Electricity Act. Until such laws are in place, he says, the company considers it socially responsible to prioritise households and smaller businesses.

Because electricity needed to secure supply to the general market is not available to large users, Landsvirkjun has repeatedly turned away prospective large customers when no additional power was available, Arnarson writes. He argues that this does not mean competition is ineffective: when selling to large users, the company seeks the highest price, or a price comparable to what those businesses pay elsewhere. He says heavy industry now pays a price comparable to the one paid for baseload electricity on the general market.

Arnarson says both the Competition Authority and the EFTA Surveillance Authority have repeatedly argued that market forces have not been allowed to operate in Iceland’s electricity market. He also writes that electricity is the only product sold in Iceland for which consumers enjoy the most favourable prices known in Europe, and that prices are more stable than elsewhere.