Why people in Germany are being advised to switch energy suppliers

What's happening?

After Russia’s invasion of Ukraine in February 2022, energy prices reached record highs, causing misery for consumers in Germany. 

But in the last few months, the cost of gas and electricity has been falling. In fact, March was the first month since the start of the war where energy prices were below the cost from the same period last year.

At the moment many suppliers are lowering their prices for electricity and gas, and consumer protection groups are recommending that households check their contracts, compare prices and change suppliers if necessary.

"Household electricity prices for new customers have fallen continuously since December 2022," said electricity market expert Mirko Schlossarczyk from the consultancy Enervis. Current offers are below 30 cents per kilowatt hour, he added.

"For existing customers and those receiving the basic (default) supply, however, the price level is still noticeably higher and is currently a little over 40 cents (per kilowatt hour)." These prices have only fallen slightly in recent months, Schlossarcyzk said.

Why have prices been falling?

The coalition government's energy price caps account have helped to bring costs down. 

The electricity price brake  - which caps electricity costs for households and small businesses with a yearly demand of up to 30,000-kilowatt hours at 40 cents per kilowatt hour - has been applied to all electricity customers in Germany since January this year. 

The gas price brake - which caps prices at 12 cents per kilowatt hour - started in March 2023 and retroactively covers the months of January and February.

READ ALSO: Why consumers in Germany are seeing their energy costs go down

For the remaining usage, the regular market price has to be paid by households - and costs there have been going down significantly.

According to Schlossarczyk, the main reason for the decline in consumer electricity prices is the significant drop in wholesale prices.

However, many consumers haven't yet benefited from the lower market prices for gas and electricity, as they are still being supplied with energy that suppliers bought at higher prices last year.

When it comes to electricity, 76 percent of electricity tariffs in the basic supply sector - in other words, the suppliers that have the most customers in a certain region - are still above the electricity price brake in some cases despite reductions, according to the comparison portal Check24. 

In the alternative supply, 88 percent of the tariffs are cheaper than the price brake, said a spokesperson.

With an annual consumption of 5,000 kilowatt hours, new customers currently pay an average of 31.4 cents per kilowatt hour. In the basic supply, on the other hand, it stands at an average of 43.2 cents. For comparison - according to the German Energy Association BDEW, the average electricity price in Germany was just under 32 cents in June 2021.

But the basic supplies aren't immune to the downwards spiral in prices. According to a spokesperson, the comparison portal Verivox sees "a clear trend towards price reductions at present".

For the months of June, July and August, the portal has so far registered 94 electricity price reductions averaging a 12 percent drop, although there are also a few increases. 

For the coming months, Schlossarczyk expects prices of 28 to 30 cents per kilowatt hour for new customers. For existing customer contracts and people receiving the basic supply he expects some noticeable price reductions.

What's happening with gas prices?

According to Verivox, gas prices are also declining significantly.

In the basic supply sector, the portal has so far registered 75 price reductions by an average of 17 percent for June, July and August. Nine suppliers have announced increases averaging 9 percent.

Check24 has registered 106 gas price reductions of the basic supply since January. Despite these reductions, 90 percent of the gas tariffs in the basic supply are still above the gas price brake, the company reports.

On average, consumers there were paying 13.3 cents per kilowatt hour of gas. In contrast, 80 percent of the tariffs in the alternative supply are already cheaper than the price brake. Check24 puts the average at 9.4 cents.

According to BDEW, the average gas price in Germany in June 2021, i.e. before the energy crisis began, was 6 cents per kilowatt hour.

What do consumer experts say about the energy price development?

They say that customers in Germany should take action if they can.

"We recommend switching suppliers," said Christina Wallraf, energy expert at the Consumer Advice Centre in North Rhine-Westphalia.

The prices for new customers are "quite acceptable again".

Those who want to switch should examine their existing contract, said Wallraf, adding that it is important to find out the remaining term and the notice period in order to work out the right time for a change of supplier.

"If you are currently in the basic supply, the contract can be terminated at any time, taking into account the statutory two-week notice period," she said.

The consumer advice centre also suggests using comparison portals to make an individual adjustment before making a tariff comparison.

READ ALSO: How to change electricity and gas suppliers in Germany 

For example, the filter "direct switching option via the portal" should be set to display as many tariffs as possible.

Consumers should also make sure that prices are guaranteed in the contract in case case energy prices rise again in the coming winter.

The centre also advises consumers to do an internet search on the company to check if they have positive or negative reviews from previous customers. 

Could energy prices go through the roof again this winter?

Energy market expert Schlossarczyk thinks that is unlikely.

"Due to the price cap in the end customer price segment alone, the burden limit for household customers is capped until April 2024," he said.

He predicted that there wouldn't be a price explosion for household customers in the coming autumn and winter.