Adjustment of local and county authorities’ general grant
News story | Date: 28/09/2022 | Ministry of Finance
The Government proposes a one-year deduction in the general grant to local and county authorities with income from licence power. The proposal applies to local and county authorities in the areas with the highest electricity prices.
What is the content of the proposal?
The proposal entails a one-year deduction in the general grant totalling NOK 3 billion from local and county authorities with income from licence power located in the price areas Eastern Norway (NO 1), Southern Norway (NO 2) and Western Norway (NO 5).
The value of licence power in the areas with high electricity prices is estimated at about NOK 13 billion in 2022 and NOK 11 billion in 2023, based on price estimates established at the beginning of August this year, up from NOK 4 billion in 2021.
In calculating value, power is valued on the basis of the estimated market price (spot price). For 2023, a price of 182.73 øre per kWh is assumed in Eastern Norway, 193.93 øre per kWh in Southern Norway and 179.93 øre per kWh in Western Norway.
At the same time, how much of the increased value is realised in the form of increased income in individual local and county authorities is uncertain. How the power is disposed of and at what price it may be sold varies considerably between local and county authorities. There is no complete overview of this. Due to this lack of information and uncertainty, the Government plans to withdraw a limited proportion of the estimated value.
The Government's proposal to withdraw NOK 3 billion corresponds to an estimate of less than a third of the assumed value of the licence power in 2023 alone. In this way, the Government intends for the local government sector to retain a large share of the estimated income for the two years as a whole, and it has been taken into account that local and county authorities may have tied up the price in long-term contracts.
How is the deduction calculated?
There is considerable variation in the use of licence power. None shall face any deduction for income they cannot realise as a result of legally binding contracts entered into before this proposal was announced on 28 September. In order to achieve a reasonable distribution of the deductions, the Government will give the local and county authorities the opportunity to report by 1 December 2022 on how the licence power is employed. The Government will determine the final distribution on the basis of the information submitted. For those local and county authorities that do not report, the deduction will in principle be based on their share of the total amount of licence power in the relevant price area, valued at the anticipated market price.
The Government will provide more detailed information on the authorities’ reports in connection with the budget presentation. The Government will monitor developments in electricity prices and, if necessary, return to the Storting in connection with the Revised National Budget for 2023.