Of course, Mayor Heinz Geiling was aware that the energy crisis would also affect his Sielenbach. When it comes to the electricity that the Swabian community in the Aichach-Friedberg district needs for street lighting, wastewater treatment, administration, the building yard and the like, he and his community council believed they were on the safe side. After all, they had already taken part in a so-called electricity bundle tender for the years 2023 to 2025 in spring 2021 – long before the Russian war of aggression in Ukraine and the explosion in energy prices – which the Bavarian Municipal Council and a service manager had offered. That’s why Geiling was convinced that things wouldn’t get that bad. The bidding should have ended long ago.
But the tender didn’t go through. The community day and the service provider only bought the electricity for Sielenbach in late summer 2022. “Exactly when the price was highest,” says Geiling. “The result is brutal.” In 2023, the town of 1,800 will have to pay 189,000 euros for the electricity it consumes. In 2021 it was 46,000 euros for the same amount. “More than quadrupling, we never expected that,” says Geiling. “We actually wanted to set up one or two playgrounds. We’ll have to postpone that now.”
As in Sielenbach, there is huge disillusionment in many places in Bavaria these days. A large number of municipalities, especially small and medium-sized ones, take part in the electricity bundle tenders of the municipal day, which take place every three years. Their calculus: the greater the amount of electricity that is to be purchased for the next three years, the cheaper the price will be in the end. They also save themselves a lot of bureaucracy if they transfer the procurement of electricity to the service provider. That is why the municipalities are getting together in large numbers for the bundled tenders. However, it is unclear exactly how many municipalities are affected by the extremely poor result of the current tender. The community day does not name an exact number, they are talking about almost 1,500 “corporations”, which can include not only communities but also administrative communities or special-purpose associations. To make the dimensions more comprehensible: 1,500 municipalities, which corresponds to three quarters of all municipalities in the Free State. The overall cost increase is likely to be correspondingly immense. We are talking about a three-digit million amount.
The electricity was bought at the worst possible time
Critics such as Sielenbach Mayor Geiling accuse the municipal council and its service provider of delaying the tender and then – in a kind of last-minute panic – buying the electricity at the worst possible time and at the most expensive price. In fact, the price for a kilowatt hour of electricity on the Leipzig electricity exchange reached its highest level this year in August 2022 at an average of 45.5 cents. It was at this time that the tender took place. The conclusion was correspondingly expensive: gross, i.e. including taxes and duties, the municipalities have to pay around 69 cents per kilowatt hour of electricity over the three-year term of the contract, according to a letter in which the municipal council informed about the conclusion. And further: “Compared to 2020, these results lead to a roughly tripling of the gross prices, for 2023, with different prices for the delivery years, to a fourfold increase.”
“The municipal council and the service provider should have at least informed us about the dramatic development and given us the option of withdrawing from the tender,” says Mayor Geiling. “Instead, he let more than a year pass and then presented us with a fait accompli.” Geiling is also so upset because there are certainly municipalities that have coped much better with the explosion in electricity prices. Altenstadt in the Weilheim-Schongau district, for example, will purchase electricity for its facilities in the coming year at a gross price of just under 45 cents per kilowatt hour. You can read about it in the local newspaper. Although that is more than twice as much as the current price, it is 24 cents less than Sielenbach has to pay. The difference between the two municipalities: Altenstadt did not take part in the bundled tender. Instead, he gets his electricity himself.
At the municipal day, it is hoped that the electricity price brake will also apply to municipalities
You can’t understand the excitement at the community day. There it is firmly assumed that the electricity price brake decided in the Bundestag also applies to municipalities. The state would then bear the costs for 80 percent of the current consumption, which is more than 40 cents per kilowatt hour. This means that “the fuel that we saw at the beginning is clearly out there,” says Stefan Graf, energy officer at the community day. The fact that it is ultimately the taxpayers who compensate for the costs of the communities via the electricity price brake does not seem to be a big issue for the community day.
When electricity prices went down in late summer, they “slammed it straight away,” says Graf. “In hindsight,” he concedes, the community council should have “delayed the appointment for another four weeks.” But no one could have known whether the price of electricity would climb even higher. You didn’t have a “crystal ball”. One was “driven”: so many communities whose old contracts expire on January 1, 2023. “It’s a lot of pressure,” says Graf, “we couldn’t have said: Let’s see how the war in Ukraine develops and then we’ll advertise again in February next year.” Why didn’t you order earlier before the prices exploded? Procurement for 1,500 corporations is expensive and takes time, says Graf. And at some point “someone has to award the contract. You can’t ask all the municipalities in a few hours whether they agree with the price”.
That doesn’t convince the Sielenbach mayor Geiling. He and his municipal council have decided to have the bundled tender reviewed by a specialist lawyer. “You can’t simply accept something like this without being contradicted,” says Geiling. “And the community day should develop mechanisms so that such evil developments are ruled out in the future.” At the community day, the European Union sees an obligation to “question” the principle of the merit order. The price of electricity is therefore determined by the most expensive power plant, most recently it was the gas power plants. The high price of gas therefore has a direct impact on the price of electricity. A “structural problem” that needs to be solved, says Stefan Graf. “Otherwise we’ll feel the same way again in the next crisis.”