Energy sector warns of rising electricity prices

Budget crisis - Energy sector warns of rising electricity prices

The energy industry is warning of rising electricity prices in the wake of the budget crisis. Without a federal subsidy for transmission grid fees, end customer prices would rise significantly, said Kerstin Andreae, Chairwoman of the Executive Board of the German Association of Energy and Water Industries (BDEW), to the German Press Agency. "An affordable electricity supply is of great importance, especially in times of uncertainty - also from a socio-political perspective." BDEW is appealing not to question the subsidy, but to leave it in place and to secure funding as quickly as possible.

Specifically, this concerns a federal subsidy of up to 5.5 billion euros planned for the coming year to proportionally finance the transmission grid costs. The money was to come from the Economic Stabilization Fund (WSF) - however, as a result of the budget ruling by the Federal Constitutional Court, the federal government will have to dissolve this special fund at the end of the year. The money for the subsidy would therefore now have to come from the core budget. But this is likely to be difficult. The federal government has to plug a hole of 17 billion euros.

Price brakes expire at the end of the year

The WSF will also be used to finance the state energy price brakes, which will expire at the end of the year and not at the end of March as originally planned. Federal Chancellor Olaf Scholz (SPD) had said in the Bundestag that electricity and gas tariffs were now available again throughout Germany that were significantly higher than before the crisis - but mostly below the upper limits of the price brakes and also noticeably below the prices last fall and winter. However, should energy prices rise unexpectedly and dramatically again, the German government would be able to take countermeasures at short notice.

Association warns of domino effect

"Due to the effects of the energy crisis, electricity prices are still significantly higher than in the past," said Andreae. "It was therefore absolutely right of the Bundestag to cap the transmission grid fees and thus curb end customer prices." After the extreme increases in energy prices last year, it is now important to signal consistency and reliability to customers.

"If the subsidy were to be discontinued, this would also trigger a domino effect for companies at various stages of the energy industry's value chain: If the transmission grid fees rise, the distribution grid operators will also have to increase their fees," said Andreae. "In turn, energy suppliers will have to include the overall increase in grid fees in their price calculations and adjust prices that have already been announced. Due to the legal deadlines, this would no longer be possible by January 1, 2024, but would have to be done as soon as possible."

The grid fees are a component of the electricity price. If the federal subsidy for the fees for the transmission grids - the electricity highways - were to be abolished, the comparison portal Verivox calculates that a family with an electricity consumption of 4,000 kilowatt hours would incur additional annual costs of around 100 euros.

The green electricity provider LichtBlick even expects an additional burden of almost 170 euros for a household with an annual consumption of 4000 kilowatt hours if the federal subsidy is abolished. The gross electricity costs would rise by 4.15 cents per kilowatt hour. The promised subsidization of transmission grid fees, which the electricity grid operators have already factored into their grid fees, must be maintained.

Warning also from the chemical industry

The German Chemical Industry Association (VCI) also expressed its alarm. "Electricity prices in Germany are already a massive competitive disadvantage," said VCI Managing Director Wolfgang Große Entrup on Friday. "We have been fighting for months for relief." It is "completely ignorant" if the planned federal subsidies to stabilize grid fees are cancelled and there is a threat of these costs doubling for all electricity consumers. In the event of electricity price increases, the transformation to climate neutrality would be further jeopardized.