There will be a lot of changes to the costs of electricity and gas for household customers in the new year. The energy price brakes, which cap the price of a large part of consumption above a certain level, will expire at the end of the year. Network fees for electricity are also rising significantly.
The CO2 tax on gas will be increased at the beginning of the year. In addition, the VAT reduction for gas and district heating will no longer apply on March 1st. Both will be taxed at 19 percent instead of seven.
The wholesale prices for electricity and gas, which have now fallen again, provide some compensation. As a result, many providers announced price reductions at the turn of the year.
Electricity: Basic suppliers announce price reductions
These also include many basic suppliers, i.e. the energy companies that supply most households with electricity or gas in a network area. These are often municipal utilities. According to the comparison portal Verivox, they announced 600 price reductions of an average of 13 percent in their basic service and special tariffs at the turn of the year.
“For a three-person household with an annual consumption of 4,000 kilowatt hours, this corresponds to a relief of around 283 euros per year,” explains Verivox energy expert Thorsten Storck. At the same time, 83 increases of an average of 6 percent were announced. For a model household, this means additional costs of 93 euros.
It should be noted that only 24 percent of the total withdrawal volume from household customers is still supplied via a basic supply tariff. However, according to the Federal Network Agency, basic suppliers continue to have a “strong position” in their distribution areas: they supply a further 37 percent of household electricity through contracts outside of basic supply.
According to the comparison portal Check24, network fees are rising by around 32 percent. With an annual consumption of 5,000 kilowatt hours, this means additional annual costs of 163 euros. According to Check24, the price differences between basic services and alternative providers are still large: the average price for basic services will in future be just under 44 cents per kilowatt hour, but for alternative providers it will be an average of just under 30 cents.
Downward trend in the exchange electricity price
The wholesale price plays an important role in the end customer price. “The downward trend in electricity prices on the stock exchange has continued in recent months,” says electricity market expert Mirko Schlossarczyk from the consulting firm Enervis. He cites lower coal and gas prices as reasons. The capacity expansion and electricity feed-in from renewables would also have increased noticeably in 2023. The electricity consumption is also significantly below the previous year’s values.
In the coming months, the price level will consolidate or continue to decline slightly. “The electricity price quotations for delivery in the coming months and for the entire year 2024 are currently consistently below 100 euros per megawatt hour.” The last time such a price level existed on the futures market was over two years ago. However, uncertainties remained. This makes it difficult to make accurate feed-in forecasts for renewables. The crisis mode in the gas market is also far from over. Rapidly rising gas prices would immediately be reflected in rising electricity prices.
Expert: End customer prices could decline
Under normal circumstances, Schlossarczyk expects retail prices for household customers to remain the same or fall further in the coming months. “This should be more evident in existing customer contracts than in new customer contracts due to the different procurement strategies of suppliers.”
The price reductions of the last few months have already been largely taken into account there, so this effect is likely to be smaller. However, the noticeable increase in network fees has a counteracting effect. “This will affect existing and new customers equally from January 2024.”
Gas: Basic suppliers announce price cuts
Similar to electricity, there are also a lot of price reductions for basic gas suppliers. Verivox counted 500 with an average reduction of 15 percent. This compares to 56 increases of an average of 12 percent.
Check24 expects gas costs to average 2,537 euros in 2024 with an annual consumption of 20,000 kilowatt hours, 17 percent more than in 2023, which corresponds to 370 euros. The largest share of this, at 217 euros, was the increase in the VAT rate from 7 to 19 percent on March 1st. In the model calculation, the abolition of the gas price brake and the higher CO2 tax also result in higher costs. Network usage fees, on the other hand, fell slightly, it was said.
Wholesale gas prices are also falling
When it comes to gas, the wholesale price also plays an important role in the retail price. “Wholesale prices in the gas market are currently falling significantly,” says gas market expert Sebastian Gulbis from the consulting firm Enervis. The reasons include well-filled gas storage facilities and a sufficient supply of liquefied natural gas (LNG) and Norwegian gas.
“If we continue to have warm weather and no other markets in the world compete with us for LNG, we could get through the winter relatively relaxed.” However, if it gets very cold and less LNG is available for Europe, prices would shoot up again. “The crisis situation is not over yet, Russian gas has not yet been completely replaced in Europe and Germany.”
Gas retail price depends on procurement strategy
According to Gulbis, what this means for end customer prices for household customers depends heavily on the energy companies’ procurement strategy, as with electricity. If suppliers have repeatedly secured long-term tranches for the coming year over the past 12 months, this could mean higher prices than for shorter-term procurement. The reason is that at the beginning of this period the prices were significantly higher than recently.
“This means that in the currently falling market, changing suppliers may well be worthwhile.” It could be problematic for older contracts that were concluded, for example, at the end of 2022 and are still valid next year. These would sometimes be above the price brakes that are now expiring. “This could result in high costs for certain customers,” says Gulbis.
Consumer advice center: Check change of provider
The consumer advice centers advise electricity and gas customers to consider changing providers because of the additional costs announced for 2024. “Consumers should definitely check a tariff portal to see how much savings they could save,” said energy expert at the North Rhine-Westphalia Consumer Center, Christina Wallraf, to the German Press Agency.
“Households should check: How much am I paying at the moment? What notice period do I have? How long does my contract still run for?” said Wallraf. If you are satisfied with your current provider, you can inquire about other tariffs there and, if necessary, switch to a cheaper tariff.
For new contracts, the consumer advice center recommends a term of 12 months. With bonus tariffs, consumers should look at the conditions under which the bonus is paid out. Consumers should also be careful not to end up with a dubious provider. Households could, for example, do an internet search to find out whether there have been problems with a provider in the past.
