Costs for consumers: how gas prices are reacting now

As of: 06/23/2022 4:10 p.m

Wholesale prices have shot up again on the European gas market. Consumers are threatened with the next shock: suppliers may in future be allowed to pass on increased purchasing costs directly to customers.

“From now on, gas is a scarce commodity”: With these words, Federal Minister of Economics Robert Habeck (Greens) justified the now proclaimed alert level two of the gas emergency plan. The main reason is the sharp drop in deliveries from Russia and the high market prices. According to Habeck, the German storage facilities are about 58.7 percent full. “But if Russian gas supplies via the Nord Stream 1 pipeline remain at the low level of 40 percent, a storage level of 90 percent by December can hardly be achieved without additional measures,” the ministry said.

Germany has the largest storage capacities for natural gas in Central and Western Europe, distributed over 47 underground storage facilities at 33 locations operated by around 25 companies. According to the industry association Ines, they hold gas with a total energy content of around 255 terawatt hours. This corresponds to about a quarter of the annual gas consumption in Germany. If the filling level of the German storage tanks is currently just under 59 percent, it was just under 46 percent a month ago. During this period, the filling level has increased by around 0.4 points per day on average.

Significant premium

But the lower deliveries from Russia make it appear at least doubtful that the pace of filling the storage tanks can be maintained. On the European TTF reference market, the peak price for one megawatt hour of short-term natural gas reacted to Habeck’s announcement with a price increase of eight percent to EUR 138. This corresponds to the equivalent of 13.8 cents per kilowatt hour.

It is not possible to say in general terms how the increase in market prices will affect gas consumers in concrete terms. However, heating is likely to become even more expensive in the future, especially for those gas customers who still have contracts with a longer-term price-fixing clause whose calculations are based on prices from before the Ukraine war.

Should purchase prices continue to rise, the alert level of the emergency plan also provides for a so-called price adjustment clause. It allows energy suppliers to pass on higher prices to customers so as not to get into financial difficulties. This clause has not yet been activated – also in order not to overburden households and companies.

Taxes and duties are added

A look at the TTF market shows which price increases are conceivable. Natural gas with a delivery date of next winter (December 2022) cost around eight cents per kilowatt hour in the weeks before the war began, and since then it has gone up by around six cents. Natural gas for delivery next summer (June 2023) currently costs around 8.5 cents per kWh – with an increase of 4.5 cents, the price has more than doubled since the beginning of the year.

The percentage increases are very high, but they are relative when you look at the composition of the natural gas price for end customers. Because in addition to the pure gas costs plus the profit margin of the energy supplier selected by the customer, there is a whole range of other surcharges. These include what is known as the network fee, which the operator of the gas network receives, the concession fee, i.e. a fee paid by the municipalities, value added tax, the natural gas tax and the CO2 price. Most of these price components do not react to the increased wholesale prices because, like the natural gas tax, they are fixed.

In many cases, the unit kilowatt hour is of no help in determining personal consumption. Because the natural gas meters in buildings measure the natural gas consumption in the unit cubic meter (m3). One cubic meter corresponds to approximately 10.5 kilowatt hours. The conversion factor is subject to certain fluctuations – depending on the quality and energy content of the natural gas fed in by the supplier.

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