As procurement conditions on the electricity exchange have deteriorated significantly, Stadtwerke Gießen has no choice but to raise its electricity prices.
From 1 January 2023, Stadtwerke Gießen (SWG) will apply new prices for the basic electricity supply. The labour price will rise by 18.18 cents to 46.67 cents per kilowatt hour. For an average household with an annual consumption of 2,200 kilowatt hours, this means additional costs of around €33 per month - an increase of almost 53 per cent. "This immense price increase is a consequence of the truly dramatic developments on the energy market," explains Jens Schmidt, Commercial Director of SWG. On the Leipzig energy exchange EEX, the cost of electricity had recently risen to more than seven times the 2020 level by the autumn - prices have tripled compared to the beginning of this year.
What is happening on the electricity market?
The gas price, which has also been high for some time, is now having a noticeable impact on the price of electricity. The reason for this is the merit order principle, which can be simply translated as "order of advantage". It ensures that power plants in Germany are utilised according to a certain system: Cheaper producing plants have priority over more expensive ones. This approach has proven to be sensible and practicable for many years. However, when a centralised type of production gets out of hand in terms of price - as has been the case in recent months with the all-important generation in gas-fired power plants - the process reaches its limits. This is because the merit order also means that the most expensive megawatt hour determines the price for each megawatt hour.
Another reason for the current rise in electricity prices lies in the usual procurement strategy of the basic suppliers, including Stadtwerke Gießen. "We purchase electricity in many small instalments and up to three years in advance," explains Andreas Fuchs, Head of Sales at SWG. This means that SWG buys similar quantities of electricity on basically fixed, regular dates and thus achieves a long-term average cost effect. "Of course, we always keep an eye on the exchange," Andreas Fuchs points out. "But both the quantitative and temporal leeway for the purchase of individual partial quantities are manageable." With this tried-and-tested method, SWG reduces the risk of massive price fluctuations for its customers. "The soaring stock market started more than a year ago. Compared to what has been happening on the EEX in recent months, our prices have not risen nearly as much," explains Jens Schmidt.
Unfortunately, the benefits of this strategy, which has been quite successful so far, steadily diminish when stock market prices climb permanently or remain high over a longer period of time. In such situations, SWG's prices always follow with the corresponding time lag. This is exactly what is happening right now. This affects not only the basic supply, but the entire current product range. In fact, the various tariffs - including those for electricity heating systems and heat pumps - are becoming between 53 and 115 per cent more expensive. There is a simple reason why electricity for night storage heaters in particular will cost more than twice as much as before: SWG last adjusted prices in 2020. At that time, electricity was available on the exchange for a fifth of what it currently costs.
Still good in comparison
"As dramatic as the situation is, SWG is sometimes well below the competition in comparison," calculates Andreas Fuchs. A look at the relevant comparison portals underlines this statement: nobody in Giessen is currently offering cheaper prices than SWG. Quite a few competitors - including large municipal utilities - have already exceeded the 60 cent mark for a kilowatt hour of electricity. "We know that this comparison doesn't help anyone when ever-increasing energy costs are overstretching the household budget," adds Ulli Boos, SWG company spokesperson, and offers some advice: "Anyone who can foresee payment difficulties should contact us directly so that we can look for a solution together. Simply cancelling payments is not a good idea. We then have to initiate a dunning procedure, which causes additional costs and unnecessary hassle."
To avoid high additional payments, SWG automatically adjusts the instalments. Customers will be informed of this in separate letters.
Prices for gas and heat remain constant
SWG is keeping its prices for natural gas and district heating constant. There is also the prospect that politicians will soon decide how exactly the gas price brake and the electricity price cap are to be implemented and to what extent the two measures will ease the burden on energy customers. It goes without saying that SWG will do everything in its power to implement both requirements as quickly as possible once the legal framework has been finalised.
A look into the crystal ball
The situation on the energy market is currently easing a little. "But I think it's far too early to deduce a trend reversal from this," Jens Schmidt summarises. The fact is: regardless of the unforeseeable development of the war in Ukraine, another variable remains at least as important: the weather. Germany should survive a mild winter with the gas already in storage and that which is imported via new channels. However, if it gets really cold for a longer period of time, gas prices - and therefore also electricity prices due to the merit order principle - are likely to rise massively again.
SWG, however, is doing everything in its power to offer its customers the best possible conditions. "No matter where the journey takes us, we will of course keep a close eye on developments on the energy market and pass on every advantage we can realise," promises Jens Schmidt.
Save, save, save
Against this backdrop, saving energy remains the top priority. "I now assume that we will all have to do without some of the comforts we have come to love," continues Jens Schmidt. How much depends on many individual factors. After all, consumption can often be significantly reduced without sacrificing comfort - through mindful behaviour, for example. "The experts from our energy advice centre have all sorts of tricks up their sleeves to help you tap into this savings potential," reveals Ulli Boos. Appointments for free consultations can be booked at www.energiessen.de/online-terminvergabe. Of course, SWG has also compiled numerous practical tips on its website.
If you would like to contact SWG about possible payment difficulties, please call 0800 23 02 100, free of charge from all German networks. SWG will of course also respond to an e-mail sent to info@stadtwerke-giessen.de.