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Eurofound's EU PolicyWatch collates information on the responses of government and social partners to the COVID-19 crisis, the war in Ukraine, rising inflation, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.

Factsheet for measure NO-2021-49/2321 Updated – measures in Norway

Electricity Support Act: Reducing household electricity costs

Strømstøtte til husholdninger

Country Norway , applies nationwide
Time period Temporary, 01 December 2021 – 31 December 2024
Context COVID-19, War in Ukraine
Type Legislations or other statutory regulations
Category Responses to inflation
– Support for energy bills
Author Aasmund Arup Seip, FAFO and Eurofound
Measure added 18 May 2022 (updated 06 March 2023)

Background information

As a result of increased energy prices in the autumn 2021, the government introduced a temporary electricity support scheme for households that compensate for extraordinarily high expenses for electricity consumption. It applied initially for the period 1 December 2021 to 31 March 2022. The scheme is regulated in the Temporary Act of 22 December 2021 no. 170 (the Electricity Benefits Act).

On 10 March 2022, the government announced that it would extend the electricity support scheme for households until March 2023. The extension was based on an updated assessment of the power situation in Norway and Europe. Expectations of continued high gas prices in Europe was an important factor, as well as high CO2 prices. In addition, the government felt there was uncertainty about how much the reservoirs, especially in southern Norway, will be filled up until next winter.

In a new announcement on 1 April 2022, the government proposed increased support to housing benefit recipients in areas with high electricity prices in April and May 2022.

Content of measure

The aim of the electricity support scheme, introduced in December 2021, is to contribute to a reduction in the costs of electricity consumption in the monthly electricity bill for private households connected to the distribution network, if the electricity price exceeds a set threshold value. The electricity benefit scheme is designed so that the state provides benefits to households if the average electricity spot price for the month exceeds the threshold level of NOK 0.7 (€0.07) per kWh in the price range of the household. When calculating benefits, the difference between the average monthly electricity spot price and the threshold value of NOK 0.7 (€0.07) per kWt excluding VAT shall be used as a basis. This amount must be multiplied by the benefit rate. For energy use from January to March 2022, the benefit rate is 80%. For electricity consumption in December 2021, the benefit rate was 55%.

In addition to the electricity support scheme, the electricity tax is reduced in the period January to March 2022 by 47% compared to 2021, and in the period April to December 2022, the electricity tax is reduced similarly by 9%.

Updates

The following updates to this measure have been made after it came into effect.

15 February 2023

In January 2023, leaders of the large Unions in the Norwegian Confederation of Trade Unions demanded that the government amended the electricity support scheme for households. One reason for this is that high electricity prices drive the inflation and makes it more difficult to negotiate a coordinated wage settlement. At first, the government was reluctant to change the scheme, but in mid-February, the government announced that the electricity support scheme would be changed. In the current scheme the consumers are compensated on the basis of a monthly average price of electricity. However, the actual price fluctuates hourly, and is usually higher when consumption is high. In the changed scheme, the compensation will be based on the price and consumption hour by hour. Households are compensated 90% of the electricity price exceeding NOK 0.7 (€0.07) per kWh. This includes the summer months (April-September) as well. The scheme was extended throughout 2024, as well, from an initial end date of 31 March 2023.

15 February 2023

The government has decided to appoint an expert committee to assess the current system for setting the electricity prices. The committee will assess which measures in the short and long term can ensure lower and more predictable prices for electricity users. The committee will be chaired by managing director Inge Gran in the research institute SINTEF Energy Research and will submit a report to the government by 15 October 2023.

08 February 2023

The first adopted electricity subsidy scheme for households did not cover houses registered as holiday homes. The 8 February 2023, the Ministry of Petroleum and Energy established changes to the temporary regulations on electricity allowance, in which households registered as permanently living in a holiday home by 18 January 2023 will be entitled to electricity allowance according to the scheme. The allowance will include consumption from and including September 2022.

11 November 2022

In the national budget for 2023, the government proposed to extend the electricity subsidy scheme for households until the end of December 2023. This was adopted by the Storting. At the same time the electricity tax for the first three months of 2023 was reduced.

07 August 2022

In March 2022, the electricity support scheme for households was prolonged until March 2023, and on 7 August 2022, the government announced that it will propose to the parliament (Storting) to increase the support from 80 to 90% of the cost when the electricity price is over NOK 0.7 (€0.07) per kWh, for consumption in September and for the rest of the year. It was then clear that there was a majority in the parliament that wanted to increase the electricity support for households.

The government informed that the subsidy scheme will cost more than initially estimated, since the power price has turned out to be higher than expected in April, and that a new cost estimate will be presented in October 2022 in the state budget 2023.

Use of measure

The allocation to the electricity benefit scheme was in December 2021 set at NOK 5.5 billion (€550 million) on an uncertain basis. Total expenditure for the state on the current benefit scheme will depend on the actual average electricity spot price in the various price areas as well as the actual consumption in the period. The estimated allocation for benefits to households in the period December 2021 to March 2022 is a total of NOK 9.2 billion (€920 million), according to the government’s hearing document of 10 March 2022.

For the whole year 2022, measures have been adopted or proposed for approximately NOK 22.3 billion (€2.23 billion) to help people cope with the high electricity costs. In addition, the government expect the extension of the electricity support schemes to March 2023 to entail a need for funding in 2023 of approximately NOK 6.3 billion (€630 million). Expenditure for increased support to housing benefit recipients in areas with high electricity prices in April and May 2022, was estimated at NOK 151 million (€1.51 million) in 2022.

Target groups

Workers Businesses Citizens
Does not apply to workers Does not apply to businesses Applies to all citizens

Actors and funding

Actors Funding
National government
Public support service providers
National funds

Social partners

Social partners' role in designing the measure and form of involvement:

Trade unions Employers' organisations
Role Consulted No involvement
Form Any other form of consultation, institutionalised (as stable working groups or committees) or informal Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

  • No involvement
  • Main level of involvement: Peak or cross-sectoral level

Involvement

No information on social partners involvement during design and implementation of the measure.

Views and reactions

Confederation of Norwegian Enterprise (NHO) was not invited to give any comments on the extension of the electricity support scheme in the government’s hearing. However, it is reason to believe NHO supports the scheme all the time the employer’s organisation has called for a corresponding support scheme for companies. In a statement on 11 March, the Deputy CEO of NHO, Anniken Hauglie, argued that the situation was extraordinary and that the European effort to become independent of Russian gas, would make it necessary to establish an electricity support scheme for a period. Based on the current price situation for energy, the rapid restructuring of European energy policy and the challenges this entails for Norwegian companies, NHO proposes that a scheme for electricity support to companies be established, with rapid implementation, NHO stated on its web site.

The Norwegian Confederation of Trade Unions (LO) gave in a hearing to the extension of the scheme in March 2022 support to the proposal to extend the electricity benefit scheme. LO asked the ministry in the future to evaluate the accuracy of the scheme, various distributional effects it provides and effects in the power market. Furthermore, LO argued that the evaluation of the scheme must be seen in connection with a long-term work to ensure more renewable power and assess the necessary regulation of the market to avoid power shortages and high electricity prices in Norway. LO also asked the government to extend the period with reduced electricity tax to keep inflation down.

Sources

Citation

Eurofound (2022), Electricity Support Act: Reducing household electricity costs, measure NO-2021-49/2321 (measures in Norway), EU PolicyWatch, Dublin, https://static.eurofound.europa.eu/covid19db/cases/NO-2021-49_2321.html

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Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process.