At the turn of the year: wave of price increases for electricity

More than seven million electricity customers have recently been informed about massive price increases. It does vary regionally. But it is likely to be expensive everywhere in the coming years.

Numerous consumers in Germany recently received price increases from their electricity suppliers. Some of the increases at the turn of the year are drastic. For example, the Cologne-based company Rheinenergie will charge more than twice as much per kilowatt hour (kWh) as of January for the basic supply: around 55 cents will be due there in the future – an increase of almost 130 percent.

Companies pass on increased costs to customers

Rheinenergie is not an isolated case. “The new year begins with a massive wave of price increases for electricity,” said Thorsten Storck, the 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 the high procurement costs, which are apparently increasingly reflected in the company’s long-term purchasing strategy. “Compared to the previous year, the prices on the electricity exchanges have risen by more than 300 percent, at the top they had increased more than tenfold. In addition, the network fees are also increasing,” the company explains the price jump.

The extreme increase in gas prices as a result of the Russian war of aggression against Ukraine is considered to be one of the main reasons for the rise in electricity prices. In wholesale trading, the now expensive generation of electricity from gas-fired power plants often determines the price of electricity for all other types of generation. Experts speak of the so-called merit order: the most expensive power plant that is still needed to cover demand is decisive for the price of electricity.

7.3 million households affected

The comparison portal Check24 has already become aware of more than 580 cases of electricity price increases in the basic supply at the turn of the year. “Around 7.3 million households are affected,” the company recently reported. The increases amount to an average of 60.5 percent. Verivox comes to an average plus of 54 percent because of a different data basis.

“The electricity price increases at the turn of the year are sometimes drastic,” emphasized energy expert Udo Sieverding from the consumer advice center in North Rhine-Westphalia. “Unfortunately, the tariffs for new customers via the brokerage portals are even higher, so that changing providers in most tariff areas does not bring any savings.” This is only likely to change over the next few months. Customers in the basic service therefore currently have no choice.

“In the event of price increases, customers outside of the basic service should even consider making use of their special right of termination and falling into the basic service,” advised the consumer advocate. The basic service tariff used to be considered a rather expensive tariff. In some places, however, it is already below the special tariffs of other providers.

Electricity costs are rising, especially in Cologne and Munich

The price increases at the beginning of the year are meanwhile very different across Germany. For example, the Stadtwerke in Potsdam (Brandenburg) are increasing prices by around 21 percent to 46.5 cents per kWh. At MVV Energie in Mannheim (Baden-Württemberg), just under 45 cents are due for the basic supply from January – instead of the previous 27 cents.

The East German energy supplier EnviaM (Chemnitz, Saxony) will in future charge 48.1 cents – 20.1 cents more than before. In addition to Cologne, the increase is also hefty in Munich: in the basic supply of the municipal utility, a kilowatt hour will cost 61.9 cents from the New Year. Previously it was 25 cents.

The significant increases at the turn of the year are not the first in the recent past: According to calculations by Check24, a model household with an annual consumption of 5000 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.

Further high prices expected

This high level is likely to remain the reality for households in the coming years. The electricity market expert Mirko Schlossarczyk from the consulting firm Enervis does not assume that electricity prices will fall back to the level before the Ukraine war. Rather, he expects consumer prices in 2023 and 2024 to be well over 40 cents per kilowatt hour gross on average.

Even in the years that followed, it would probably not fall below 40 cents, in some cases even 50 cents are possible, he told the dpa. “We also see a consistently high price level on the energy trading markets in the long term.” It is true that wholesale electricity prices could also fall more significantly in the future as a result of a prospectively falling gas price level and the increased expansion of renewable energies.

However, duties, surcharges, fees and taxes have the noticeably larger share of the end customer price. “We will no longer see 32 cents in the coming years simply because of the currently comparatively high wholesale electricity price level and increases in network charges that have already been announced.”