Mandatory procurement and capacity components

Based on the government decision, a new procedure of calculation of payment of mandatory procurement components (MPC) enters into force from 1st of January 2018. 

Further on for all electricity consumers the total payment for the MPC will consist of two parts, where one will be fixed and the other will vary in proportion to electricity consumption.

For example, for a household with a single phase connection, the monthly capacity component will amount to 1.215 EUR (including VAT), and for a household with a three phase connection and requested capacity 16 A it will be 3.135 EUR (VAT included).

The variable part (the mandatory procurement component) will be formed in proportion to consumed electricity - 0.0177 EUR/kWh (VAT included).

Thus, the total payment, for example, for a household with a single phase connection and electricity consumption 100 kWh per month will equal 100 x 0.0177 + 1.215 = 2.99 EUR (VAT included).

 OIK infografiks

You can calculate the impact of new MPC on your utility costs by using a calculator available on the website of Enerģijas publiskais tirgotājs AS: eptirgotajs.lv/oik-kalkulators

Mandatory procurement and capacity components

What are the major changes in application of the MPC?

According to the changes in application of the MPC from 1st of January 2018, the MPC payment is split in two parts, where one part is variable, taking into account electricity consumption, and the other part of the MPC is a fixed payment, the amount of which depends on the technical characteristics of connection to the power system. This means that the total amount of MPC payable by the end user will consist of both electricity consumption and fixed MPC payment which is payable also in cases when there is no electricity consumption at the site.

What does MPC differentiation mean?

Differentiation of MPC payment means that the amount of fixed part of the payment is different for different end users, taking into account the technical characteristics of users' electricity connection. The connection differences are categorised based on the number of phases of the connection and the allowed load of the connection. Payment of the variable part or payment for electricity consumption will be the same for all users and it will be by approximately 1.2 cents per kWh lower than before.

Why such changes were necessary, what is the justification behind them?

At the end of 2016, after broad discussion the MPC differentiation solution was supported by the government and Saeima [Parliament] who implemented amendments in legislation by stipulating how the MPC costs will be split and how they will be withheld from end users in future. The amendments were justified on the basis that not all end users participate in covering the MPC costs and for some the burden of the MPC payment is disproportionally high which restricts the competitiveness of the Latvian businesses. The amendments present a constituent of the government policy providing for releasing the burden of electricity costs, thus strengthening competitiveness of businesses.

For whom is MPC differentiation beneficial?

Taking into account that the average amount of MPC is reduced to 25.79 EUR/ MWh, electricity bills will be lower for most households and companies, thus improving competitiveness of the Latvian manufacturing companies at the same time.

How can I calculate new MPC costs?

You can calculate new MPC costs by using a calculator on the website of Enerģijas publiskais tirgotājs AS.

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