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German electricity prices to soar by 25 percent on average

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DPA/The Local - [email protected]
German electricity prices to soar by 25 percent on average
A plug and adaptor. Photo: picture alliance/dpa | Sina Schuldt

A study by German price comparison portal Verifox suggests electricity tariffs are set to go up by an average of 25 percent in the coming months.

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In August, September and October, Verivox counted 123 price increases from electricity suppliers, with an average increase of 25 percent.

For a three-person household with a consumption of 4,000 kilowatt hours, this means an average annual increase of €311.

Previously, competitor Check24 had reported average price increases of 47.4 percent in September.

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"In view of the high wholesale prices, we expect numerous electricity price increases in the coming months, which will be an additional burden for households," said Verivox energy expert Thorsten Storck.

The average electricity price could be 45 cents per kilowatt hour or more in the coming year, he explained. According to Verivox, it is currently around 42 cents.

Electricity is also being traded more expensively than ever before on the stock exchange. On the European power exchange Epex Spot, the price for a megawatt hour rose to over €550 this week - equating to more than 55 cents per kilowatt hour.

According to calculations by the German Association of Energy and Water Industries (BDEW), the average price in July was 19 cents. 

READ ALSO: Reader question: Should I invest in an electric heater in Germany this winter?

The reason for the price increase is not only the war in Ukraine, but also the low water levels on the waterways. Ships on the Rhine, for example, cannot currently sail fully loaded - a situation that is having an impact on deliveries of oil and coal.

Along with nuclear, gas and renewable sources, these are both used in the production of electricity. 

Additionally, in July, Germany exported an unusually high amount of electricity to neighbouring France, where numerous nuclear power plants were out of action, and Switzerland, where the drought has hit hydropower capabilities.

To cater for the increased demand, more gas was used in the production of electricity than during the same period in 2022, the Federal Network Agency revealed. 

Criticism for VAT cut

Households are already facing the prospect of hikes in energy prices in October as the government prepares to introduce a levy on gas bills to aid the struggling sector.

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The levy, which will be set at around 2.4 cents per kilowatt hour of gas, will be offset by a temporary reduction in VAT, the government announced on Thursday.

READ ALSO: Germany plans to slash VAT on gas bills to seven percent

"With this measure we are offering gas customers relief that is significantly larger than the extra burden imposed by the surcharges," Chancellor Olaf Scholz (SPD) said of the plans.

However, there have been calls for more targeted relief to support low- and middle-income households that are struggling to make ends meet.

"The reduction in VAT relieves everyone, including those who do not need it at all," the Paritätische Gesamtverband - a charity umbrella association - told the Rheinische Post on Friday. "Which also means top earners, who could relieve our social systems with the VAT."

Chancellor Olaf Scholz (SPD)

Chancellor Olaf Scholz (SPD) announces a reduction in VAT on gas bills to offset the gas levy. Photo: picture alliance/dpa | Kay Nietfeld

The traffic-light coalition had initially wanted to scrap VAT on gas bills entirely but received pushback from EU authorities in Brussels, who said removing VAT would contravene EU competition laws.

Instead, the government will use the leeway it is allowed under EU law to drop the rate of VAT to seven percent - two percent above the EU's five-percent minimum.

The reduced tax rate will run until March 31st, 2022, when the gas levy is due to expire. 

READ ALSO: EXPLAINED: How much will Germany’s gas levy cost you

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