German power providers raise prices by 12 percent
The price hikes far exceed the increase in the surcharge that covers the cost of renewables power. Experts charge that the lower prices on the power exchange are still not being passed on to consumers.
This week was the deadline for German power providers to announce rate hikes for 2013 – and raise the retail rate they did. According to consumer advocate portal Verivox, retail power prices increased by 12 percent on the average, most of them claiming that the cost of renewables is the main reason.
Unfortunately for these firms, nearly everyone fails to understand the calculation. Admittedly, the surcharge to cover the cost of renewables did increase by 1.68 cents per kilowatt-hour for the coming year. Yet, that figure represents a mere 6.5 percent of the average retail rate of around 26 cents for the coming year – just over half of the actual rate increase.
Furthermore, the increase in the renewables surcharge should at least be partly offset by lower prices on the power exchange, which are down by an estimated 15-18 percent over the past 12 months – thanks largely to solar and wind power offsetting demand for peak conventional power, which tends to be more expensive. As German Environmental Minister Peter Altmaier of the Christian Democrats put it, "it's hard to understand why these price hikes so clearly exceed the increase in the renewables surcharge, especially since prices on the power exchange have fallen so dramatically over the past year."
Obviously, firms are not passing on the lower purchasing prices to consumers. Market experts, such as Photon Magazine, have pointed out that a lot of the power consumed is not traded on the spot market, but is actually agreed in contracts with terms of around 18 months, so that power providers have not yet been able to pass on lower spot market prices to consumers. But increasingly, that argument is no longer justified. For 2013, it should be possible for power firms to realize that purchase prices will be lower.
Not surprisingly, Germany's largest power firms are raking in the cash. RWE announced its figures for the first three quarters of 2013 last week, and the firm grew its profits by around eight percent to 4.6 billion euros with – and this is important – revenue remaining roughly the same. In contrast, Eon increased its sales revenue by a full 20 percent, but its profits more than doubled. Clearly, some firms are raking in the cash by gouging consumers and blaming renewable power for the price hikes.
The German Association of Energy Consumers has said that any price hike exceeding eight cents per kilowatt-hour is excessive and called on German consumers to switch to cheaper providers; in many cases, providers of green power are cheaper than conventional providers. German consumers can choose from roughly 600 power firms that compete on the market. (Craig Morris)