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How not to get shocked by your next German electricity bill

Ever opened your electricity bill in Germany and wondered why and how you're paying so much? Are you confused by German electricity contracts and their masses of inscrutable text?

How not to get shocked by your next German electricity bill

Dealing with the in and outs of getting connected and paying electricity bills is something many of those moving to Germany end up struggling with. 

To help our readers get a better sense of how electricity contracts in Germany work, The Local spoke with CEO and co-founder of digital renewable provider Ostrom, Matthias Martensen, to answer some of the most common questions asked by The Local Germanys readers.

Can you please explain ‘Nachzahlung’?

“Unfortunately, Germany is still not very digital, so upon registering with an energy provider you need to submit an estimation of your consumption for one year. After one year you will be asked to submit your actual meter reading, so your provider can calculate your final bill.

If you have used more energy than estimated, you will have to pay the extra amount – this is known as Nachzahlung or ‘after payment’. However, if you used less energy than estimated you will receive a refund into your bank account. You should of course receive a statement from your provider, indicating whether you will need to pay, or be refunded.” 

Does a landlord have any right to refuse if you want to change your electricity provider?

“This depends on your rental agreement. If you pay for your energy yourself, you have the freedom to choose your own supplier.

In the vast majority of cases in Germany, outside of a shared apartment, your electricity provider is your choice, and it is important that you compare the offers of providers, so that you pay only what you need.”

What are the major factors that influence my electricity prices?

“Energy prices are driven by two main factors—one is the raw commodity prices for coal, oil and gas, and the other is the weather. When there’s lots of wind and sun, Germany can produce a substantial amount of renewable energy, which is cheaper.

Of course, global events also have an effect on the prices offered by electricity providers, as we have seen over the last couple months.”

Looking for a new electricity provider? Ostrom is a sustainable energy provider with all services provided in English. Find out more

How often can we expect to see changes in our electricity bill prices? How will current events influence how much I pay for electricity?

“At Ostrom we try to minimize price swings as much as possible. As you can imagine, this has been difficult to do in the last few months due to the energy crisis and now Russia’s invasion of Ukraine. Unfortunately, Germany is still quite dependent on conventional power plants, a lot of which use gas and coal that is imported from Russia.

Over the next couple of months, a lot will depend on whether European governments will introduce oil and gas embargoes, as we have seen discussed in the media, or whether Russia will stop exports altogether. Both would mean higher electricity prices across all of Europe.”

What are some ways that I can reduce my electricity bill? 

“There are several ways you can save on energy. The most effective is to create good habits like switching off lights when you aren’t in the room, hanging your clothes to dry instead of using the dryer or turning appliances off instead of leaving them in standby mode.

You can also ensure that your household appliances have a high energy efficiency rating, as shown by the EU energy label. You can also ask to see the Energieausweis, or ‘energy certificate’ for an apartment or building you are looking to rent, to see how energy-efficient the property is at retaining heat, for example. 

Perhaps one of the most effective things people can do to save is provide regular meter readings via the app to the supplier. This means that your tariff can be more accurately calculated. 

Ostrom put together a comprehensive list of tips on how to save energy here: Ostrom‘s Energy Saving Tips.”

Find out more about the German energy provider built for internationals, whose service you can manage from your smartphone

A fixed-price guarantee could end up costing you more than you think.

I see many electricity providers offering a ‘fixed price guarantee” – will I save money with one? 

“Fixed prices automatically mean a tiered-system and you need luck when you sign up. In the current situation for instance this means you are locked into high prices. At Ostrom all customers are on the same price and if prices decrease, we will pass those savings to our customers. The majority of providers don’t like to take risks, and will pass the cost burden onto customers, even if circumstances change and energy becomes cheaper over time.

This is why we don’t offer fixed price guarantees at Ostrom. When prices decrease, so does our tariff. Lowering prices is something we’ve already done this year. With our flexible monthly plan, every customer pays the same price for electricity, and you can adjust your monthly payment at any time.”

In recent months the legislation surrounding contract lock-ins has somewhat changed, but the fact remains that traditional energy suppliers still require you to sign a minimum 12-month contract with them at a fixed price.

Ostrom co-founder, Matthias Martensen, and the Massbach Solarpark in Bavaria.

Not only is Ostrom a German electricity provider that passes savings onto the consumer, it is specifically designed for international workers and students in Germany. A simple tariff applies to all customers, and the more often you submit a meter reading, the more likely you are to save money. 

Furthermore, all Ostrom documentation and contracts are in English and everything can be controlled from the smartphone app, including the submission of meter readings. 

Finally, if sustainability matters to you, Ostrom sources their power from renewable sources, including the Maßbach Solarpark in Bavaria. 

Ostrom is a good choice for those making the move to Germany. As Matthias Martensen told The Local: “We know that electricity contracts in Germany can prove bewildering. Since we’re a young international company ourselves, we have a natural understanding of the needs of a modern, flexible and international clientele. It’s in our DNA.”

Looking for a sustainable energy provider designed for international residents? Find out more about how Ostrom does energy differently, and how you can benefit

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ENERGY

Is now a good time to switch energy providers in Germany?

The market prices for electricity and gas in Germany are cheaper now than they have been for a long time, leading some consumer advisors to recommend customers shop around for lower tariffs.

Is now a good time to switch energy providers in Germany?

Why are energy prices going down? 

Last year, energy prices in Germany rose to record heights following the Russian invasion of Ukraine. But now, partly thanks to a milder winter than initially feared, market prices for gas and electricity have taken a downturn.

READ ALSO: ‘Over half’ of Germans heating homes less or not at all

So far, however, most consumers are yet to benefit from the lower prices, as they are still being supplied with the electricity and gas that suppliers bought at higher prices last year.

This is particularly the case with the so-called basic suppliers (Grundversorger) – the companies that supply most customers in a region (such as Vattenfall or GASAG) – as they tend to buy electricity and gas on a long-term basis, in some cases years in advance. 

Last year, this meant that the basic suppliers could still offer the lower prices of the past, but gradually, they have had to raise their tariffs. 

“As a result, they now have some catching up to do and are passing on the high procurement prices to customers,” Christina Wallraf, an energy expert at the consumer advice centre in North Rhine-Westphalia explained.

Who is offering low prices?

Gas and electricity prices from so-called alternative suppliers – energy companies other than the basic suppliers – are now falling across the board.

This is because such suppliers have a short-term procurement strategy, which means they can “pass on favourable market prices more quickly than the basic suppliers buy for longer periods”, Hans Weinreuter from the Rhineland-Palatinate consumer centre explained.

For new customers – energy shoppers who join a new provider – prices are considerably cheaper than they were a few months ago. 

A green plug in front of an electricity bill. Photo: picture alliance / Jens Kalaene/dpa-Zentralbild/dpa | Jens Kalaene

The current average price of a kilowatt hour of gas for new customers is currently around 14.3 cents – 64 percent less than the average at the beginning of September last year when it reached a peak of around 40 cents. 

Electricity prices for new customers have also dropped by around 24 percent since mid-October, when a kilowatt hour of electricity for new customers still cost an average of 56 cents, whereas the current price is 42.7 cents.

For basic suppliers, the prices have moved in the opposite direction. Since the beginning of September, basic gas supply prices rose on average from 12.7 to 17.7 cents per kWh, while the price of basic electricity supply rose by 27 percent – from 36.8 to 46.6 cents per kWh since mid-October.

When does it make sense to switch?

Numerous consumer advisors recommend those who are currently stuck in very expensive tariffs to look around for alternatives.

“That’s where a look at possible alternatives makes sense,” says Hans Weinreuter from the Rhineland-Palatinate Consumer Center.

Udo Sieverding, an energy expert at the consumer advice centre in North Rhine-Westphalia, told the Berliner Taggespiegel: “Anyone who wants to switch now has a good chance of finding a cheaper tariff.”

He added that there is no rush, however, and said that he considers “the risk of prices at discounters going up again in the next few months to be low”.

A man turns up the thermostat on a radiator.

A man turns up the thermostat on a radiator. Photo: picture alliance/dpa | Hauke-Christian Dittrich

However, Julia Schröder, an energy law expert at the Lower Saxony consumer advice centre, recommended that consumers should not take the decision to switch suppliers lightly, as this usually means being bound to a new provider for one or two years when “nobody can foresee” how prices will develop over the next 24 months. A change would therefore be worth it only if it resulted in substantial savings, she advised. 

However, Ingbert Liebing, CEO of the Association of Municipal Enterprises (VKU), recently criticised the appeals of experts to consumers to switch from basic suppliers to discounters with cheap tariffs.

READ ALSO: Energy prices could double long-term in Germany, utilities companies warn

“It was foreseeable that now again soldiers of fortune would enter the energy market and think they can make a quick deal, at the expense of the municipal utilities and basic suppliers,” he said of the lower tariffs currently on offer by alternative providers. 

He warned against cheap tariffs that lure customers in with low prices for a short period of time and then raise them again in a matter of months. 

Can I switch from a basic to a discount provider?

Theoretically, switching from a basic to an alternative energy provider should be straightforward. Unlike those in contracts with special tariffs, customers of basic suppliers generally have the legal right to cancel at any time with two weeks’ notice and look for another supplier.

READ ALSO: EXPLAINED: How to change electricity and gas providers in Germany

Those who are not with a basic supplier should look at their documents and check for how long their current gas supply contract is still valid. If there is a supplier with more favourable conditions, it may be worthwhile to terminate the contract. 

Oncoming price brakes

Another thing to bear in mind when considering whether to switch energy suppliers is the oncoming price brakes for gas and electricity. 

READ ALSO: 7 reasons to be optimistic about life in Germany in 2023

In the case of electricity, 80 percent of consumption will be capped at 40 cents per kilowatt hour from March, backdated to January. The same applies to gas: from March, backdated to January, natural gas customers will receive a state-guaranteed price of twelve cents per kilowatt hour for 80 percent of their previous annual consumption.

A person holds a wallet with cash.

A person holds a wallet with cash. Photo: picture alliance/dpa | Lino Mirgeler

Despite the price brakes, it can still be worth switching if the contractually agreed energy price with your current supplier is over 40 cents per kilowatt hour for electricity and over twelve cents per kilowatt hour for gas.

That’s largely because the price brakes for electricity and gas are currently limited to just one year.

“If the price brakes are not extended, every kilowatt hour consumed will cost the regular contract price again next year. This is another reason why it will be important for consumers to choose the cheapest possible tariff this year,” said Thorsten Storck from Verivox.

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