Political decisions are driving up the cost of district heating, natural gas and electricity. Sometimes noticeably and against the market trend.
On 13 and 15 December 2023, the Bundestag and Bundesrat reached long-awaited decisions. Since then, it has been clear that the CO2 price will rise from 30 to 45 euros per tonne at the turn of the year. On the same date, the price brakes previously granted for energy will be cancelled without replacement. In addition, the German government has cancelled the originally planned extensive subsidies to the transmission system operators for the grid fees for electricity. Last but not least, the regular VAT rate of 19 per cent instead of the reduced 7 per cent is expected to apply to heat and gas again from 1 March. "These political decisions will have a noticeable impact on our prices," explains Jens Schmidt, Commercial Director of Stadtwerke Gießen (SWG).
What does this mean in concrete terms?
The new political requirements will already be reflected in the prices for district heating in Giessen from January. Due to the higher costs for CO2, it will be 0.41 cents per kilowatt hour (Ct/kWh) more expensive. All in all, this means that a kilowatt hour of district heating will cost 18.61 cents/kWh from 1 January 2024. The CO2 price alone will then account for 1.11 Ct/kWh of district heating supplied.
The impact of the political decisions will be truly dramatic because the price brake that has been in place since April of this year will also be cancelled without replacement. It will cap the cost of a kilowatt hour of district heating at 9.5 cents/kWh until the end of December - at least for the majority of consumption. The full price for district heating will therefore be due from January 2024. "I don't know whether the politicians realise what such a price hike means for our customers - especially now in winter, when the demand for heat is naturally higher," Jens Schmidt sums up, adding: "For people, the removal of the price brake and the simultaneous increase in CO2 costs means an unprecedented increase in the monthly costs they have to pay. There is nothing to gloss over."
Irrespective of the budgetary background and constraints, the legislator is sending out a signal that runs counter to its intentions by bringing forward the cancellation of the price brake. After all, district heating plays a central role in the planned decarbonisation of Germany. The current development thwarts this very idea. "Such decisions are not helpful in winning people over to this efficient form of heat supply and driving forward the expansion as desired by politicians. The German government is doing the energy transition a real disservice," says Matthias Funk, Technical Director of SWG.
What will happen in the near future?
Based on developments on the energy market, it can already be estimated with relative certainty that district heating itself will become cheaper again by the first of April. However, whether this will be reflected in the gross prices to be paid remains questionable. As things stand today, the reduced VAT rate of 7% for district heating will only apply until 29 February. From March 2024, the regular 19 per cent would have to be paid again. "We naturally monitor the data on which the price calculation for our district heating is based very closely. And everything indicates that there will be a significant reduction in the net prices for district heating in April. How much of this will ultimately reach our customers remains to be seen," continues Jens Schmidt.
The reintroduction of the standard rate of VAT will also result in higher natural gas prices - even though exchange prices have fallen significantly. "We can compensate for the increase in the CO2 price by purchasing more cheaply, but we can't compensate for the difference between the reduced and normal VAT rates by any stretch of the imagination," explains Jens Schmidt. In other words, SWG is not raising its net prices. However, customers will probably have to pay more for natural gas from 1 March 2024 due to the VAT rate of 19 percent that will then apply again.
In the case of electricity prices, the now significantly lower exchange prices will be offset by noticeably higher grid fees. Until the ruling of the Federal Constitutional Court made it necessary to restructure the 2024 budget, the German government planned to cushion these additional costs incurred by the transmission system operators with 5.5 billion from the Economic Stabilisation Fund. However, the subsidy fell victim to the red pencil in the budget negotiations. As a result, German electricity customers will ultimately have to pay for the higher grid fees in full - which will cost them 0.89 cents/kWh. The resulting electricity price adjustment is also due to take effect on 1 March and will affect all tariff models except PowerPack Pur. As the two price-driving factors will take effect from 1 January, SWG will pass on the costs incurred for the first two months of the year to the new electricity price.
Back in the here and now
Those responsible in Lahnstrasse are aware of what the district heating prices that come into effect in January in particular mean for their customers. That is why SWG is offering appropriate support. "We are open to all those who see financial bottlenecks approaching and let us know in advance. We usually find a solution that works for everyone involved," promises Matthias Funk. In these cases, however, it is important to actively seek dialogue and get SWG on board in good time. After all, if an instalment cannot be collected in the first place, there is a lot of unnecessary expense - for both parties.
In addition, the energy advisors at the SWG customer centre on the market square can of course also help with their in-depth knowledge. They know all kinds of useful tips and tricks for saving heating energy. Which remains the order of the day, regardless of the cost. After all, there is still a certain residual risk of a gas shortage in Germany - in the event of a harsh winter, for example.
SWG's energy experts can be contacted in person from Monday to Friday between 9 am and 6 pm. However, due to the expected demand, it is advisable to make an appointment. The best way to do this is online at www.energiessen.de/online-terminvergabe. If you prefer, you can also request a callback here: www.energiessen.de/rueckrufformular. Last but not least, there is of course also the option of making an appointment by telephone: 0641/708-1453