Price of District Heating

In Finland, the customers of district heat suppliers are housing co-operatives or other house owners. The consumption of thermal energy is metered for each customer. The heating costs are divided between residents, usually according to living space. Apartment-specific heat metering would require considerable extra investment, and its metering accuracy still needs further development.

In Finland, there is a commonly used pricing system, which divides into:
• connection fee
• power charge
• energy charge

The customer pays a connection fee for joining the district heating network. The fee varies according to location and the size of the house.

The use charges for district heating consist of the energy charge and the power charge, which is tied to the contracted capacity or contracted water flow. The amount of the energy charge depends on the fuels used and the variable costs in heat procurement. The power charge covers mainly the fixed costs of heat procurement.  

Regulatory supervision of district heating activities in Finland is based mainly on competition legislation and partly on the Electricity Market Act. The position of consumer customers is also protected by the Consumer Protection Act. According to the Finnish Competition Authority, a district heat supplier holds a dominant market position with respect to the customers connected to the district heating network. Pricing is also regulated by energy taxation. The impacts of emissions trading must also be taken into account.

Twice a year (1 January and 1 July), the Finnish Energy Industries gathers information from district heating companies on the district heating prices for three new residential buildings of various sizes.

The average price of district heat in the beginning of year 2011  was 6,3 cents per kilowatt-hour. About 29% of the price of district heat consists of taxes. The price varies between locations. In general, the size of the district heating system has the biggest impact on the price level. In larger towns, district heat is produced energy-efficiently in cogeneration with electricity, which is a favourably priced solution. In addition to the fuels used, the age of the district heating plant, the structure of the population centre, the efficiency of investments and the plant’s management, as well as the owner’s yield requirement have an impact on the price level.