Energy crisis: Electricity becomes more expensive – a wave of price increases is expected at the beginning of the year

Price increases from their electricity suppliers have hit many homes recently – sometimes drastically. Cologne-based company Rheinenergie, for example, will charge more than double per kilowatt-hour for basic supply from January: in the future, around 55 cents will be due there, almost 130 percent more than before.

Rheinenergie is not an isolated case: “The new year begins with a massive wave of electricity price increases,” says Thorsten Storck, an energy expert at the comparison portal Verivox. Basic suppliers would now have to gradually pass on the higher market prices to their customers.

Rheinenergie also refers to high acquisition costs, which are increasingly reflected in the company’s long-term purchasing strategy. “Prices on the electricity exchanges increased by more than 300 percent compared to the previous year, at the top they increased more than tenfold. In addition, network fees are also increasing,” the company explains the price jump.

The extreme rise in gas prices as a result of Russia’s war of aggression against Ukraine is believed to be one of the main reasons for the increase in electricity prices. On a wholesale level, the now expensive generation of electricity from gas-fired plants often sets the price of electricity for all other types of generation.

The comparison portal Check24 has already recorded more than 580 cases of electricity price increases in the basic supply at the turn of the year. “About 7.3 million households are affected,” the company says. Increases reach an average of 60.5 percent. Verivox achieves an average plus of 54 percent due to a different data base.

“The increase in electricity prices at the turn of the year is sometimes drastic,” says Udo Sieverding, an energy expert at the Consumer Advisory Center in North Rhine-Westphalia. “Unfortunately, the new customer tariffs via intermediary portals are even higher, so changing the provider does not bring any savings in most tariff areas.” That will likely change over the next few months. So customers in the basic service currently have no choice.

“In the event of a price increase, customers outside the basic service should even consider using their special right to cancel and be included in the basic service,” advises the consumer advocate. The basic tariff of the service was previously considered a relatively expensive tariff. In some places it is already under special tariffs of other providers.

Price growth at the beginning of the year varies greatly in Germany. For example, Stadtwerke in Potsdam (Brandenburg) is increasing prices by about 21 percent to 46.5 cents per kilowatt hour. At MVV Energie in Mannheim (Baden-Württemberg), the basic supply costs less than 45 cents from January – instead of the previous 27 cents. East German energy supplier EnviaM (Chemnitz, Saxony) will charge 48.1 cents in the future, 20.1 cents more than before. In addition to Cologne, the increase in prices is also huge in Munich: in the basic supply of the municipal network, a kilowatt hour will cost 61.9 cents from the New Year. It used to be 25 cents.

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Significant increases at the turn of the year are not the first in the recent past: According to Check24 calculations, a model household with an annual consumption of 5,000 kilowatt hours (kWh) paid an average of 29.4 cents per kWh in November 2020. A year later it was 31.6 cents. Currently (November 2022), the average is 42.7 cents.

The electricity price brake is intended to ease the burden of high electricity prices. In the case of households and small businesses, the price for 80 percent of last year’s consumption should be capped at 40 cents per kilowatt hour. If the customer consumes more, he pays the regular contract price. This should motivate savings. Suppliers should take the electricity price brake into account when making deductions from March. The brake should then take effect even back to January and February. Many details still need to be clarified before the corresponding law is adopted.

Consumer advocate Sieverding also fears abuse. “We do not rule out that one or the other company will also use price brakes to increase more than absolutely necessary.” The bill prohibits abuse. “But who’s really supposed to control that? And besides, the providers were able to raise it in January, before the law went into effect.”

What about electricity prices? Electricity market expert Mirko Schlossarczyk from the consulting firm Enervis does not expect electricity prices for households to fall back to pre-war levels in Ukraine in the coming years. It expects consumer prices in 2023 and 2024 to average well over 40 cents per gross kilowatt hour. Even in the following years, 40 cents would probably not be undercut, in some cases even 50 cents is possible, he told the German press agency dpa.

“We also see a sustained high price level in energy trading markets over the long term.” It is true that wholesale electricity prices could also fall more significantly in the future as a result of the prospectively falling price level of gas and the increased spread of renewable energies. However, duties, surcharges, fees and taxes have a significantly larger share of the price for the end customer. “We will no longer see 32 cents in the coming years simply because of the current relatively high wholesale electricity price level and the increase in network charges that have already been announced.”

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