Energy costs surged in the second half of last year due to a perfect storm of events including the Ukraine crisis, rebounding demand for gas in east Asia, and rising taxes on fossil fuels.
Utility providers have already started to pass these procurement costs onto the consumer. Comparison website Verivox concluded in autumn that the price of electricity increased by an average of 6.6 percent last year. That equated to an additional €63 for an average household with a consumption of 5,000 kilowatt hours.
Add to that an additional €330 in heating costs for a household of a similar size and it is clear that most people are going to notice a painful difference in their fixed costs this year.
In the worst case scenario, you might be one of the 800,000 customers of the company Stromio, which stopped supplying customers in early December, leaving them with little choice but to move onto a more expensive Grundversorger (default supplier) contract.
There are ways to try and reduce costs. But, be warned! Some of the tricks long recommended by consumer advocacy groups no longer apply.
Time to change your supplier?
Consumer advocacy groups used to have a rule of thumb: look into changing your electricity supplier once a year and you could save a three figure sum on your bill.
The reason for this was that many suppliers offer sweeteners for the first 12 months of your contract before bumping up the charges in subsequent years. They basically rely on customers not getting around to changing to a new supplier.
But with hundreds of providers out there to choose from, there was really no reason not to switch your supplier on a regular basis.
Things are different in the current climate. Due to the explosion in prices on spot markets, many utility companies have had to put their price up, although this is by no means a general rule. Companies that tied their purchases to longer contracts have been less affected by the price fluctuations.
“At the moment, many existing customer contracts are cheaper than what you can find on the market,” Christina Wallraf, an energy market expert from the NRW consumer advice centre, told the Redaktionsnetzwerk Deutschland last week.
“Prices are currently around 38 cents per kilowatt hour for new customer tariffs - that's relatively high,” she added.
So if you are thinking about switching your provider, it is worth looking at your own contract first. If you currently pay less than 38 cents per kilowatt hour you’re unlikely to find a better deal elsewhere.
On the other hand, if your provider has hiked your tariff up over 38 cents per kilowatt hour, you should find better value elsewhere.
Price comparison websites such as Verivox and Check24 are appropriate destinations for doing some research. Analysts caution though that some of the deals that you find on these websites may no longer be current. You should therefore call up the company to make sure that the deal is still on offer.
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It could even be worth checking out the price of your local Grundversorger at the moment. While their prices are normally higher than those offered by other companies, some of them are currently cheaper than the competition.
Customer advocacy groups warn though that some of the Grundversoger are taking on new customers on contracts that are often more than twice as expensive as existing ones.Â
The website Finanztip crunched the numbers and found that every second default supplier was offering adverse terms to new customers. In Cologne for instance, where Rheinenergie is the default supplier, the price almost doubled on January 1st from 28.68 cents per kilowatt hour to 54.09 cents.
Still, other default providers offer much better value for money. The 33 cents per kilowatt hour charged by Vattenfall in Berlin is now below the average price.
Analysts also warn against committing oneself to a long-term contract. That’s because the new government intends to abolish the renewable energy levy known as the EEG. This will happen at the latest at the beginning of 2023 and could bring down the cost of a kilowatt hour of electricity by as much as five cents.
Save money by reducing electricity usage
Given that it is an inauspicious time to change providers, many people will need to look for alternatives when saving on utility bills. The obvious alternative is to use less electricity, or be smarter about how you use it.
You can cut down electricity usage in Germany in all the usual ways. By upgrading to an energy efficient washing machine and fridge, you can save on your bills in the long term. By making sure your windows and doors aren't drafty and your thermostat isn't set too high, you will save on heating bills. And by turning off electric equipment instead of allowing it to remain on standby, you will also save money.
Consumer groups estimate that you can save over €100 by cutting down consumption.
Another trick that some households can take advantage of is using washing machines and dishwashers at night. If you have a Nachtstromtarif (night time electricity tariff), you pay less for electricity between 22:00 and 6:00.
Check your contract to see whether this applies to you. While Nachtstromtarife aren't as common as they once were due to changes in how we produce and use electricity, those who do have them can make significant savings.
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