Icelandic Electricity Market
With the Icelandic Electricity Act no. 65/2003 substantial changes were made on the organisation of the electricity market. One of the aim was to implement market conditions among producers and suppliers on the electricity market. The law are in conformity with the EU electicity directive from 1996.
According to the Electricity Act No. 65/2003 the main structural changes towards market liberalisation were only effected as from 1st January 2005 and full opening of the market was to take place in January 2006. The full opening was in fact postponed until June 2006 somewhat for reasons mainly explained by way of notice from the Icelandic Ministries of Industry and Commerce, No. 34/2005, dated 29th December 2005.
From 1st January 2005 an independent TSO has operated the grid and a separation between generation, transmission, distribution and supply of electricity was fully realised. In conformity with these changes and the requirements of the new Electricity Act, Landsvirkjun changed its wholesale selling arrangements in the general segment of the electricity market from 1st January 2005. These changes were extensive and during the long preparation period Landsvirkjun introduced to its wholesale customers, on a regular basis, the changes that the new arrangements would entail.
In order to ensure certain transparency and common rules for all wholesale customers, general conditions for Landsvirkjun‘s wholesale of electricity for the general segment of the market were published.
Landsvirkjun‘s Wholesale Contracts
Currently, Landsvirkjun provides so-called wholesale contracts, which can be valid for one, three, seven or twelve years. Moreover from the beginning of 2006 the company also provides so-called base load contracts valid from 6 and up to 12 years. In addition, Landsvirkjun provides contracts for shorter period than one year. In fact contracts for electricity purchase from Landsvirkjun can be as short as for one hour. This diversity of contracts are flexible and are aimed to meet the needs of our customers.
In a liberalised electricity market Landsvirkjun is determined to develop its wholesale strategy and provide new contracts in conformity with the development of the wholesale market.
However, it is Landsvirkjun‘s concern, that almost all other suppliers of electricity in Iceland do not sell electricity on the wholesale market to other independent retail sales companies. All other major generators in Iceland sell their generation to their own retail sales divisons only and their internal whole sale price is confidential. Therefore the exchange of electricity between independent companies is very limited, not transparent and a published whole sale power price is available only from Landsvirkjun.