HEPI Press Release June-2014

1

Household Energy Price Index for Europe

July 01st 2014

June Prices Just Released

The most up-to-date picture of European

household electricity and gas prices: VaasaETT

and two leading European energy market

authorities collaborate to track monthly energy

prices in 23 European countries

European energy price development

Electricity and gas indexes are moving in opposite

directions. Whilst European electricity prices are

higher this month than last (+1 index point),

household gas prices continue decreasing despite

geopolitical tensions at the gate of Europe (-1 index

point compared to May). The values of the electricity

and gas price indexes currently stand at 117 and 106

respectively. (Figures 1 and 2.)

Residential electricity prices

Figure 3 shows the end-user price of electricity in 23

European capital cities as of June 2014. It shows that

depending on where a customer lives in the EU, the

price that customer has to pay per kWh of electricity

can vary by as much as 140%. If we include

Belgrade, the price varies by a staggering ratio of 5.

Household customers in Copenhagen and (since

January 2013) Berlin pay by far the highest prices in

In This Months Edition

HEPI price trend EU electricity and gas prices move in opposite directions;

Spanish by-default regulated tariff replaced by a more dynamic structure;

Eastern and Southern European countries have highest prices for energy when measured at PPS;

Energy Price breakdown Market forces represent less than half of the electricity bill.

2

Europe (though the price of energy represents only a small portion of the total

price, the lions share being taxes, in fact), while inhabitants of Belgrade pay the

least.

The most significant price changes this month took place in Stockholm (+3.5%)

and in Madrid (+2.5%).

When adjusted to purchasing power in each country, most CEE countries end up

with prices which are above the European average (Figure 4). Berlin overtakes

Copenhagen as the place with the most expensive electricity followed by Lisbon and

Prague. On the other end of the spectrum, Helsinki has the cheapest electricity at

PPS1 followed by Stockholm, and Belgrade.

1 PPS is an artificial common reference currency unit that eliminates price level differences between countries. One PPS thus buys the same given volume of goods and services in all countries. It is developed by Eurostat to accurately compare prices across Europe.

Story of the month

An important development for Spanish households took place recently which will increase

price volatility in the retail market. The former by-default regulated tariff (otherwise known

as the tarifo de ltimo recurso) applied to low voltage customers with < 10 kW of

contracted demand was replaced by the Precio Voluntario para el Pequeo Consumidor.

The new by-default tariff is also regulated but is linked directly to the price of electricity on

the wholesale market. Indeed, the end-user price is calculated considering the hourly price

on the wholesale market and the households hourly consumption within the billing period.

Thus, it will result in different prices for each customer depending on their hourly

consumption. The hourly prices are calculated and published by Red Elctrica de Espaa,

S.A.U.

More information at:

www.minetur.gob.es/energia/electricidad/Tarifas/Tarifas2008/Paginas/Inicio.aspx

3

Residential gas prices

Figure 5 shows the end-user price of natural gas in 22 European capital cities as of

June 20142. The highest price by very far is paid by inhabitants of Stockholm

(nearly twice as much as the second most expensive city for gas). This can be

explained by the small size the market; there are only 33,000 household gas

customers in the whole of Sweden3. Not accounting for Stockholm, Copenhagen

becomes the most expensive city for gas where prices are 3.5 times as high as in

Bucharest, the cheapest city for gas. The price have decreased the most in Berlin

and Copenhagen by 2 and 1.5% respectively - no other significant price changes

took place.

Prices at PPS (and ignoring Stockholm) offer a very different outcome. Lisbon has

the highest adjusted prices followed by Belgrade, Warsaw and Ljubljana, while

Luxembourg, London and Brussels and have Europes lowest adjusted prices for gas

(Figure 6).

Energy price breakdown

The breakdown of end-user energy prices into four components (energy,

distribution, energy taxes and VAT) also shows major variations. (See Figures 7 and

8.) Our survey shows that on average, the energy price component (including retail

margins) represents about 40% of the end-user price of electricity, distribution

34%, energy taxes 11% and VAT 16%, while energy (including retail margins)

represents 54% of the end-user price of natural gas, distribution 23%, energy

taxes 8% and VAT 16%. Copenhagen is a very unusual case; the cost of energy as

a commodity represents less than a fifth of the end-user electricity price, by far the

lowest of all surveyed cities, whereas the energy taxes represent an astonishing

36% (over three times Europes average) and 56% if we include VAT. A similar

(albeit to a lesser extend) case is Berlin where since the introduction of the

Energiewende, the energy tax component represents 29% of the end-user price of

electricity.

Overall, the results show that market forces represent only about half of the end-

user price (both for electricity and gas) whereas national fiscal and regulatory

2 Please note that Helsinki has been left out of this analysis on gas prices. Indeed, there is virtually no residential gas market in Finland. 3 The Swedish electricity and natural gas markets 2011 (2012: 61).

4

elements are responsible for the other half through distribution tariffs, energy taxes

and VAT.

5

Figure 1. Evolution of residential energy and distribution prices excluding taxes in the EU-15

Figure 2. Evolution of residential energy and distribution prices excluding taxes in the EU-22

6

Figure 3. Residential electricity prices including taxes (June 2014)

Figure 4. Residential electricity prices including taxes at PPS (June 2014)

31.09 29.87

23.57 22.86 21.12 20.74

19.57 19.42 19.39 18.95 18.18 17.17 16.96

15.96 15.37 15.35 15.12 14.74 13.70 13.37 12.98 12.96

6.21

18.03

0

5

10

15

20

25

30

35

c per kWh

End-user electricity price (June 2014)

Source: HEPI by Energie-Control Austria, MEKH and VaasaETT Ltd. 2014 VaasaETT Ltd.

28.63 28.06 26.20 25.62 25.39

23.30 23.21 22.53 22.25 21.47 20.74 19.19 19.10 18.61 17.92 17.78 17.26 16.11 15.44 14.18 13.20 13.11

11.06

20.02

0

5

10

15

20

25

30

c per kWh

End-user electricity price at PPS (May 2014)

Source: HEPI by Energie-Control Austria, MEKH and VaasaETT Ltd. 2014 VaasaETT Ltd.

Change / previous month

Red: price increase Green: price decrease Black: no price change *: Price change due to exchange rates

7

Figure 5. Residential gas prices including taxes (June 2014)

Figure 6. Residential gas prices including taxes at PPS (May 2014)

19.47

10.60 9.38

8.59 7.84 7.67

7.06 7.05 7.04 7.00 6.93 6.90 6.42 6.38 6.00 5.57 5.40 5.28 5.21 4.39

3.35 3.04

7.12

0

5

10

15

20

c per kWh

End-user natural gas price (June 2014)

Source: HEPI by Energie-Control Austria, MEKH and VaasaETT Ltd. 2014 VaasaETT Ltd.

15.05

11.52

9.35 8.99 8.77 8.49 8.49 8.43 8.19 8.09 7.95 7.68 7.04 6.75 6.42 6.37 6.13 6.04 6.00 5.69 5.68 4.89

7.82

0

2

4

6

8

10

12

14

16

c per kWh

End-user gas price at PPS (May 2014)

Source: HEPI by Energie-Control Austria, MEKH and VaasaETT Ltd. 2014 VaasaETT Ltd.

Change / previous month

Red: price increase Green: price decrease Black: no price change *: Price change due to exchange rates

8

Figure 7. Residential electricity price breakdown (June 2014)

Figure 8. Residential gas price breakdown (June 2014)

Visit our project webpage at www.energypriceindex.com and subscribe to the free monthly update of the HEPI index for Europe.

15%

32%

58%

30%

44% 37% 39%

50% 58%

36% 41% 36% 32% 32%

35%

63%

35% 46% 40% 44% 28% 42%

35% 39%

29%

23%

26%

47%

35%

26% 31%

37% 26%

51% 42%

33% 28%

34% 36%

18%

48% 32%

27%

32%

43%

37% 47% 34% 36%

29%

4% 5% 4%

20% 13%

4% 12% 7% 12%

14% 20%

19% 11%

8% 0% 3%

14% 9% 0%

1% 11%

20% 16% 12%

18% 17% 17% 17% 9% 5% 6% 6%

17% 20% 15% 18% 12% 17% 19% 19% 20% 19% 21% 17%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Energy Distribubon Energy Taxes VAT

Source: HEPI by Energie-Control Austria, MEKH and VaasaETT Ltd. 2014 VaasaETT Ltd.

50%

22%

41% 41% 47% 42% 47%

52% 48% 47% 59%

50%

53% 66%

76% 66%

53% 64% 59%

86% 58%

52% 54%

13%

20%

35% 23%

25% 37% 27%

30%

23%

11%

21% 33% 26%

23%

17%

17% 31%

16% 22%

5%

21% 28% 23%

16%

38%

5% 20%

12% 3%

7%

5%

13% 25%

8% 3% 4%

6% 2%

0% 8%

20% 20% 19% 16% 17% 17% 18% 12% 16% 17%

12% 15% 17% 5% 6%

17% 17% 20% 19% 9%

21% 19% 16%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Energy Distribubon Energy Taxes VAT

Source: HEPI by Energie-Control Austria, MEKH and VaasaETT Ltd. 2014 VaasaETT Ltd.

9

For More Information Christophe Dromacque HEPI Project Manager Office: +358 (0)9 4159 0344 Mobile: +358 (0) 44 906 6822 Email: [email protected] (English / French) Anna Bogacka Analyst Office: +358 (0)9 4159 0344 Mobile: +358 (0) 44 906 6823 Email: [email protected] (English / Russian) Silke Ebnet Regulation and Competition Office: +43 (1) 24724 715 Email: [email protected] (English / German) Lszl Szab Head of Unit Department of Market Monitoring Email: [email protected] (English / Hungarian)

10

About the Authors Energie-Control Austria Energie-Control Austria was set up by the legislator on the basis of the new Energy Liberalisation Act and commenced operation on 1 March 2001. Energie-Control is headed by Mr. Walter Boltz and Mr. Martin Graf as managing directors and is entrusted with monitoring, supporting and, where necessary, regulating the implementation of the liberalisation of the Austrian electricity and natural gas markets. More at: www.e-control.at

The Hungarian Energy and Public Utility Regulatory Authority The main responsibilities of the Hungarian Energy and Public Utility Regulatory Authority are consumer protection, providing regulated access to networks and systems, carrying out regulatory competencies in order to maintain security of supply and fostering competition. The scope of the infrastructures, which have to be overseen by the Hungarian Energy and Public Utility Regulatory Authority has been extended in 2011 with the complete regulation of district heating and in 2012 with the water public utilities. As market progresses are becoming more widespread, we put emphasis on our market monitoring task and we pay specific attention to regional market integration both in electricity and natural gas. More at: www.mekh.hu

VaasaETT Global Energy Think Tank VaasaETT is a unique and world leading collaborative think-tank and consultancy that delivers best practice, data, analysis and highly specialised expertise from around the world to the global energy and utilities industry. We help turn the Worlds best knowledge into local strategies and solutions. At the heart of our offering is a global knowledge sharing network of thousands of contacts in over 60 countries in six continents and a vast up-to-date and ever increasing store of global best practice, data and analyses. Our world-leading expertise include: customer behaviour and psychology, customer lifetime value, smart energy issues and market efficiency issues. VaasaETT is the worlds leading source of benchmark information on customer switching trends and dynamics; retail energy prices; and, smart grid, smart energy demand and demand response programs. VaasaETT is also a founding member and manager of the European Smart Energy Demand Coalition (SEDC); the Worlds only organization that has tracked customer behavior data in every competitive electricity market globally since market opening, and a source of market tracking data in over 60 jurisdictions in six continents. VaasaETT delivers assistance to clients and its network through consulting, collaboration and its new energydatastore.com service. More at: www.vaasaett.com

11

Sources

AERS (Energy agency of the Republic of Serbia),ANRE (Autoritatea Nationala de Reglementare in Domeniul Energiei, Romania), Autorit per l'energia elettrica e il gas (Italy), BDEW (Germany), BnetzA (Germany), BRUGEL (Brussels), CEER, CNE (Spain), Commission for Energy Regulation (Ireland), CRE (France), Dansk Energi (Denmark), DECC (Great Britain), Energiamarkkinavirasto (Finnish Energy Market Authority), Energie-Control Austria, Energie-info (France), Energiezaak (Netherlands), Energy Customers (Ireland), Entidade Reguladora dos Servios Energticos (Portugal), Eurostat, Institut Luxembourgeois de Regulation (Luxembourg), ERO Javna agencija Republike Slovenije za energijo (Slovenia), ERU (Energetick regulan ad, Czech Republic), OFGEM (Great Britain), MEKH (Hungarian Energy and public Utility Autoroty), RAE (Greece), Statistics Norway, Statistics Sweden (SCB), The Energy Markets Inspectorate (Sweden), URE(Energy Regulatory Office, Poland), URSO (rad pre regulciu sieovch odvetv, Slovakia)

www.energypriceindex.com