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German utilities see retail power price stabilization 2014/15

Highlights

Two of Germany's big four utilities expect a stabilization of retail power prices over the coming years as falling wholesale prices for electricity will finally feed through after the boom in renewables added additional costs to household power bills over recent years, the sales chiefs of EnBW and RWE said.

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"Lower wholesale prices now have a bigger impact on our calculations. We will pass this on to our customers and can therefore offset higher fees set by the state," EnBW sales director Dirk Mausbeck said in a statement this week.

According to the statement, EnBW's household power tariffs will remain stable for the majority of customers deep into 2014. Only 10% of customers currently on a price guarantee tariff will see their bills adjusted to current levels once their contract term expires, EnBW said.

Germany's biggest power generator, RWE, expects a stabilization of retail power tariffs in 2015, RWE board member Hanns-Ferdinand Mueller told German daily Frankfurter Rundschau.


"We buy power many years in advance, so that lower prices on the exchange don't have an immediate effect," the RWE sales board member was quoted as saying, adding that from 2015 onwards household tariffs may no longer rise. RWE does not plan to raise its base tariff now, but will decide before the end of the year if and when to raise tariffs in 2014, Mueller said, according to the report. RENEWABLES DRIVE SPOT PRICES DOWN AS POWER BILLS GO UP

German grid regulator BNetzA said Tuesday that the so-called 'EEG-Umlage' or renewable energy surcharge for 2014 will rise 18% to a record 6.24 euro cent/kWh.

"The key reasons for this rise are falling power prices on the spot exchange and continued additions of renewable energy installations that receive support under the renewable (EEG) law," BNetzA president Jochen Homann said in a statement Tuesday.

The renewable surcharge has more than doubled since 2009 as higher solar output not only increases the amount paid to solar panel operators, but also pushes down wholesale prices.

According to media reports, the higher levy will add Eur3.30/month to the average family electricity bill, with German households already facing some of the highest electricity costs across the EU.

According to the utility lobby group BDEW, the average household paid Eur287/MWh ($393/MWh) for electricity in 2013, with fees, taxes and other levies accounting for more than 50%.

By contrast, average spot prices on Epex Spot, the benchmark for the levy, have fallen to Eur38/MWh for the first nine months of the year, a drop of 12% compared with the same period a year ago.

Year-ahead baseload power prices have fallen to their lowest level since 2005, closing as low as Eur36.20/MWh on August 5, Platts data shows. The year-ahead contract traded above Eur60/MWh just over two years ago in June 2011, before a crash in EUA carbon allowances and continued capacity additions from renewable and conventional sources saw a 40% drop in year-ahead power prices, the data shows. FUNDAMENTAL REFORM OF RENEWABLES LAW IS GOVERNMENT'S PRIORITY

"The renewed increase makes abundantly clear that a fundamental reform of the renewable energy law (EEG) is one of the most important tasks of any new government," environment minister Peter Altmaier said in a statement in response to the levy increase.

"The increase could have been avoided if parliament had agreed to the introduction of a 'brake on power price rises' [Strompreisbremse]. The speed of the increase in the 'EEG-Umlage' over recent years is not acceptable."

According to the minister, the fact that the rise was much lower than last year's hike is mainly due to the cuts in solar feed-in-tariffs introduced by the government in 2012 as well as a 10% drop in wind output this year, which is not predictable for the next few years.

Solar PV has become Germany's single largest energy source by installed capacity, with total capacity more than tripling to 35 GW over the past four years alone.

Solar output for the January-September period rose 6% year on year to 26.2 TWh, while wind output for the same period was 8% lower than a year ago at 29.9 TWh, according to renewables research group IWR.

Chancellor Merkel's CDU/CSU bloc won a landslide victory in the September 22 elections, but fell just short of an absolute majority. Merkel's Conservatives will start official coalition talks with the Social-Democrats on Wednesday.

--Andreas Franke, andreas.franke@platts.com
--Edited by Jonathan Fox, jonathan.fox@platts.com