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tiedote 27.4.2012

Ernst & Young reports ”Credit risk management in future billing regime” and “Tax collection in the common Nordic retail market” – A common response by Nordic energy companies


KS Bedrift (Norway), Paikallisvoima (Finland) and Forum för gemensam nordisk elmarknad (Sweden),  welcome the reports from Ernst & Young as a contribution in the discussion on how to develop the common Nordic end-user market. We think it is interesting that these reports, even if they are drafts at the moment, don’t support a strongly supplier-centric market model with mandatory combined billing. 

As we understand from representatives of Ernst & Young on a public hearing on the reports in Helsinki, both tax collection and credit risk management will be expensive and troublesome.  

- We support the idea of a common Nordic retail Market
-We oppose the idea of letting the supplier handling billing on behalf of the network operator
- We do not support the idea of letting suppliers invoice taxes and fees on behalf of the ------ DSOs, while the DSOs are liable for paying the authorities. 

Tax collection

It is highly questionable to have a supplier centric model in which all billing is being done by the supplier, whereas the DSOs are liable for and obliged to report and pay to different authorities. The DSOs are having all the responsibility, but no means calling in the taxes.

There is a vast complexity of VAT payment, and different legislation regarding this in each country. If the regime becomes mandatory combined billing by the supplier, this will require all suppliers to invest a lot in customer service and administration to be able to handle all different taxes and fees. This will in turn increase customer’s expenses, both because of investments and because of increasing prices of electricity.

Credit risk management

Ernst & Young regards the scenarios 1, 2 and 6 in the report as the most favorable ones. We welcome the six scenarios presented by Ernst & Young, and out of these alternative 6 seems is most viable from a risk perspective. We see it as a weakness that an alternative where the DSO does the combined billing has not been included in any of the NordREG initiated studies.

We strongly oppose scenario 1, as it will greatly increase costs for and threshold for new entrant suppliers. We are very concerned that having the supplier taking on all risk on behalf of the network operator will demand high levels of financial security to enter the marked. The suppliers will have to increase their working capital to be able to cope with the claim of both power distribution and supply invoice. In this way, small local suppliers will not be able to enter the market. This is a threat to the plurality of market actors that we enjoy in the Nordic countries today.

With scenario 2 we have most of the same objections as to scenario 1, but we find it even more complicated.

Many customers today prefer their local supplier because they provide added value to the local community. Customers of local and regional energy companies are much more satisfied with their electricity company, than the customers of the bigger and more centralized companies.

Our three organisations represent more than 200 companies in Sweden, Finland and Norway. We and our member companies are willing to take part in developing a common Nordic end-user market. This must be done with a realistic schedule that allows upcoming possible changes and should be prepared carefully.