The exact impact will become clearer in the coming months, but the Competition Authority said wood chips, the primary fuel in most of Estonia's district heating networks, are likely to become more expensive.

"Heating companies sign wood-chip supply contracts for the heating season from around June to September, so that information is still coming in," said Kertu Saul, head of price regulation at the authority.

The impact will vary by network and existing supply contracts, however, meaning higher fuel costs will not translate into the same increase everywhere.

Adven Eesti, one of Estonia's largest energy and heating companies, expects its district heating prices to rise by an average of 7 percent, or about €5.80 per megawatt-hour (MWh), business director Raivo Melsas said.

Prices in most of Adven's 14 network areas are expected to rise by 3–10 percent. In Kostivere, however, prices will fall by about 30 percent.

Melsas said the drop follows an agreement with the local government to connect Kostivere's network with the one in nearby Loo. The company also agreed to lower rental costs, keeping prices in Loo unchanged.

"The root cause is still the impact of fuel prices," Melsas said, noting that producing and transporting wood chips requires diesel and other motor fuels.

Natural gas also a factor

Natural gas could also push up winter district heating costs. Adven uses gas alongside wood chips, mainly during periods of peak winter demand, and said recent increases could begin affecting prices in October.

Nonetheless, the Competition Authority said natural gas prices will have a smaller overall impact because gas is used in only about one-fifth of Estonia's district heating networks, generally as a backup fuel.

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