Overpriced utilities

Accusations flew between German politicians and energy providers Tuesday over a new report alleging that electric companies were swindling consumers.

"As a result of unjustified price hiking, consumers will pay electric companies about one billion euros ($1.32 billion) a year too much," wrote energy expert Gunnar Harms in a report commissioned by the Green Party.

Harms' report found that, in the past two years, German electricity prices had risen by four times the rate of other European countries - evidence the Green Party took to suggest a near monopoly in Germany.

The report also claimed that a decrease in production costs was not reflected in German consumers' energy bills. On average, Harms posited, Germany's electric companies were pocketing an extra 0.8 cents per kilowatt hour.

2008 price drops still nowhere to be found

Prices of electricity on Germany's European Energy Exchange have sunk by 30 to 40 percent since 2008, and yet five of the six regional providers owned by energy giant E.ON raised their prices in April and May by an average of 4.2 percent.

Beginning this August, two million clients of energy provider RWE will have to pay 7.3 percent more for electricity.

"We purchase the electricity in regular steps up to three years before it is actually delivered to clients," a spokesperson from RWE explained, adding that the electricity currently being delivered was purchased at the high point of the market, before prices dropped in 2008.

The Green Party, however, does not buy this argument. "That [2008 price decrease] should have reached customers a long time ago," according to Baerbel Hoehn, vice-chief of the Green Party's group in parliament, who added that, "The market power of RWE and E.ON urgently needs to be broken."

Electric companies 'using a smoke screen'

The head of Germany's Federal Association for Energy and Water Management, Hildegard Mueller, defended energy providers, saying Harms' report painted a "completely false picture of the competition on the electric market." In view of the 1,100 electricity distribution companies in Germany, she claimed, no one could afford to charge more than necessary.

Electric companies argue that costs have gone up in particular due to new government-imposed “feed-in” tariffs to encourage the use of renewable energy sources, such as solar and wind power.

Hoehn countered that the electric companies were "using a smoke screen to conceal unjustified price hikes," which amounted to 52 euros a year for the average household of four. She said that customers were not yet inclined enough to shop around, and she was joined by consumer advocate groups in urging customers to "switch electric companies if they raise their prices without justification."

Four key players on Germany's electricity market, E.ON, RWE, EnBW and Vattenfall, which own most of the country's power plants and all the main distribution network, have repeatedly come under suspicion of driving up their prices. E.ON sold off some power plants in 2008 under pressure from a European Commission investigation, in the biggest victory for competition regulators to date on the German energy market.

Author: David Levitz (dpa/Reuters)

Editor: Michael Lawton