By Nora Buli

OSLO (Reuters) -Norwegian lawmakers on Monday passed a law introducing subsidised fixed price power contracts for households, the country's second scheme to help alleviate consumer concerns over volatile and high power prices.

Norway will hold a general election in September, with the cost of living and industrial competitiveness expected to be a key topic.

Called Norway Price, the model offers consumers the option to sign a fixed price contract, set at 0.40 Norwegian crowns ($0.041) per kilowatt hour (kWh) excluding fees, for an initial period from Oct. 1 until Dec. 12, 2026.

The law is limited until the end of 2029 and allows for price adjustments from 2027, while payments are capped at 5,000 kWh per month for households and 1,000 kWh/month for holiday homes.

Norway Price seeks to provide consumers with predictable costs and offers an alternative to an existing subsidy scheme introduced in response to rising prices during the 2022 energy crisis, which covers 90% of all costs above 0.7 crowns/kWh.

The government expects 60% of households and 80% of holiday home owners in southern Norway to opt for the new model, estimating it could cost 6.6 billion crowns for 2026.

Abundant and cheap hydropower has traditionally kept electricity prices low in Norway.

However, consumers in southern Norway, which is connected to other European markets via cross-border power cables, have been facing higher and more volatile prices since the wider 2022 European energy crisis.

The Norway Price law introduced by the ruling Labour Party, garnered last-minute support from former coalition partner Centre Party and the Socialist Left, and is also supported by the far-left Red Party.

Critics argued the government proposal was unnecessarily expensive, removed power saving incentives and in turn lifted prices for those not eligible, such as businesses. ($1 = 9.8811 Norwegian crowns)

(Reporting by Nora Buli, editing by Terje Solsvik)