Investors sue Finland for attempt to curb power transmission prices
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XM | 30 September 2024
Investors sue Finland for attempt to curb power transmission prices
by Anne Kauranen
HELSINKI, Sept 30 (Reuters) -Investors in Finland’s largest power distributor Caruna are taking the Nordic country to arbitration, the Finnish foreign ministry said, due to the Finnish Energy Authority’s attempt to curb rising power transmission prices for ordinary consumers.
Investors including U.S. investment firm KKR KKR.N, Swedish pension fund AMF and Canadian Ontario Teachers’ Pension Plan (OTTP) have filed two first-of-a-kind claims against Finland at the World Bank’s arbitration body International Centre for Settlement of Investment Disputes (ICSID).
The investors in Caruna, which holds roughly 20% of Finland’s power networks, accuse Finland of breaching its commitment to stable energy regulation under the 1998 Energy Charter Treaty (ECT) that allows energy companies to sue governments over policy changes that damage their investments.
In May, European Union countries including Finland agreed that the EU will quit the ECT over climate concerns.
"We have received a mediation request filed via the ICSID in Washington in August and are now looking into its contents," senior adviser Maria Pohjanpalo of the Finnish foreign ministry’s trade policy unit told Reuters.
She declined to say if Finland, too, planned to exit the ECT separately from the EU.
Finland’s Energy Authority changed from the beginning of this year the way of calculating the maximum profit power transmission grid owners as natural monopoly holders can collect, in an attempt to curb rising transmission pricing which has angered Finnish consumers for years.
The authority, which declined to comment on the dispute, justified the decision in January by saying the previous regulation bloated existing grids’ valuation and led to unfounded transmission pricing.
"The Finnish Energy Authority’s abrupt and significant changes to its long-standing energy regulation have undermined stability and breached Finland’s obligations under the Energy Charter Treaty," OTPP wrote in an emailed statement to Reuters, with KKR echoing the message in a similar statement.
A preliminary estimate puts the size of the investor claim at around 2 billion euros ($2.24 billion), a source familiar with the matter told Reuters.
The Energy Authority estimated that the regulatory changes will lead to overall power transmission sales continuing to grow in Finland but at a 4 to 10% lower pace by 2031 than under the previous regulation.
"We seek remedy for the losses sustained by us, and by extension our pension savers," AMF said in an email to Reuters.
If the ICSID takes on the requests, processing could take several years.
