Norwegian government to increase energy bills subsidy to 80 percent

Norway’s government says it will further increase a subsidy for energy bills as households struggle with rising electricity prices.

Pictured are power lines in Drammen, south-east Norway.
The government has said it will increase the share of the bill it covers. Pictured are power lines in Drammen, south-east Norway where prices have been high. Photo by Anna Valberg on Unsplash

Following calls from other parties and pressure groups, the government will increase its support package aimed at helping households feel the squeeze of record energy prices.

“We have a power system that is reliant on precipitation, reservoir levels and the energy situation in Europe. This has put us in an extreme situation lately with sky high prices. The market does not take social considerations into account, but we (the government) can do that,” Prime Minister Jonas Gahr Støre told newspaper VG.

The original package was brought in December and saw the government pick up 55 percent of the bill when the spot price, the cost of raw energy firms pay, rises above 70 øre per kilowatt hour.

The opposition and critics subsequently said that the scheme wasn’t enough. The government subsequently said it will cover 80 percent of electricity bills, subject to a vote in parliament.

The Socialist Left Party, which the country’s minority government relies on for pushing proposals through parliament, has said it would back the increased subsidy, giving the added support a majority.

READ ALSO: Five things that are becoming more expensive in Norway (and why)

The consumption cap of 5,000 kilowatt hours will remain in place. The increased support will raise the estimated cost of the package to around 8.9 billion kroner, the energy ministry said in a statement.

According to calculations by business and finance publication E24, the new support scheme will shave around a third of household energy bills, based on a consumption of 2,000-kilowatt hours at an average price of around 1.50 kroner.

The new subsidy will apply from January, meaning the deduction will appear on the bill for that month when it arrives in February.

The scheme began in December 2021 and will run until March of this year.

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Cost of living: Why food prices in Norway are going up from Friday

Shoppers' food bills in Norway will become more expensive as the prices of groceries in the country's largest supermarkets will be adjusted on Friday. 

Cost of living: Why food prices in Norway are going up from Friday

Supermarkets in Norway are likely to introduce widescale price rises on July 1st. Each year, supermarkets raise their prices twice, once in February and once in July. 

Shoppers can expect to see “noticeable price increases”, according to a group which owns two supermarket chains in Norway. 

“There is no doubt that there will be price increases, noticeable price increases,” director of business policy and government contact at Norgesgruppen, Bård Gultvedt, told newspaper VG

Why are food prices going up? 

Norgesgruppen owns the supermarket chains Meny and Kiwi. Gultvedt said that suppliers had put their prices up significantly. 

“We have experienced that the suppliers have come to us and asked for abnormally high price increases, and then we have negotiated,” Gultvedt said. 

Producer Orkla has also warned of significant price rises. 

“We are facing the most serious situation I have been in during my 31 years in the Norwegian food industry,” Håkon Mageli, executive VP of Orkla, told VG. 

Mageli pointed to higher raw material prices and a sharp increase in energy costs as to why suppliers and producers are pushing prices up. 

In the longer term, he pointed to fertilizer prices as worrying producers and suppliers. 

READ ALSO: Five essential tips for saving money on food shopping in Norway

How much will prices go up? 

The average family in Norway could end up spending 14,300 kroner more on food shopping this year due to increasing prices. 

Food prices rose by 4.5 percent earlier this year, according to national data agency Statistics Norway. Consumer economist Cecile Tvetendstrand told VG that this corresponded to a family with two adults and two kids spending an extra 7,000 kroner on food annually. 

If food prices increase by another five percent, it would add another 7,300 kroner to the average shopping bill for a family of four. 

However, how much food has risen following supermarket adjustments is currently unclear. 

Analyst Christian Anton Smedshaug from Agri Analyze has said the price for some products would rise between one to three percent, while others will see hikes of more than ten percent. 

Producer Notura has said that the price of meat and eggs will see a high price increase and that, according to an overall assessment from the company, that increases will generally be around five percent across the board.

Rema and Coop Norge SA have both announced that customers should expect rises to rise too. 

Supermarkets asked to take their share of the bill 

Minister of Agriculture Sandra Borch has asked food chains and supermarkets to not pass on all the costs to consumers. 

“It is not me as Minister of Agriculture who sets the price of food. It is set by suppliers and grocery chains. I urge and assume that they do not increase the price of food more than they have to,” Borch told business and financial site E24

The minister said that a record 10.9 billion agricultural package given to farmers to help tackle increased costs and keep farming viable without massively increasing prices was the government’s contribution to curbing food inflation. 

“The government is concerned that food prices should not rise so much. Precisely for this reason, it was important to land an agricultural settlement that is historically high,” she said.