Review of European Electricity Prices

Transcription

1 On behalf of Union of the Electricity Industry EURELECTRIC Final Report Prepared by KEMA Consulting GmbH Bonn, Germany

2 Disclaimer This report is based on empirical evidence and provides facts and observations on price developments. This report has made exclusive use of publicly available data such as from EUROSTAT, which in part might differ from numbers used by individual companies. Neither EURELECTRIC nor KEMA is bound by these figures. The objective of this report is to provide clear evidence as a basis for discussions between different stakeholders. KEMA has therefore made exclusive use of objective measures that can be explicitly quantified, such as end-user prices, network charges and fuel prices. KEMA acknowledges that there exists a variety of other factors that may have an impact on the evolution of electricity prices such as for instance the degree of market opening or market design. However, in the absence of a reasonable and straightforward measurement to quantify their impact on prices, these factors have not been taken into account in the current analysis. Project Team: Christian Hewicker (lead), François Boisseleau, Gian Carlo Scarsi, Tarjei Kristiansen, Dave Lenton, Plamen Stoimenov, Tom Eikmans, Waisum Cheng. KEMA Consulting GmbH Kurt-Schumacher-Str Bonn Germany T F KEMA Limited Regent's Place 338 Euston Road London, NW1 3BT United Kingdom T F KEMA Nederland B.V. Utrechtseweg 310 P.O. Box 9035 Arnhem 6800 ET The Netherlands T F Copyright 2005 by KEMA/Eurelectric. All rights reserved. i

3 Table of Contents 1. Introduction General Approach Price Evolution Over the Last 10 Years Development of Electricity Prices for Industrial Users Development of Household Electricity Prices for Households in the EU Development of Household Electricity Prices in the New Member States General Observations Analysis of Relevant Price Components Introduction Overview of Price Components Factors Influencing Electricity Prices General Observations Final Remarks and Observations Appendices Appendix 1: Technical Notes Appendix 2: Country Data Appendix 3: General Sources of Information...90 ii

4 LIST OF FIGURES Figure 1: Evolution of end-user prices for industrial users (24 GWh, )...6 Figure 2: National differences of end-user prices for industrial users (24 GWh, , nominal) 7 Figure 3: National differences in end-user prices for industrial users (24 GWh, , real)...7 Figure 4: Cumulative change in end-user prices for industrial users (24 GWh, )...8 Figure 5: Evolution of end-user prices for households in the EU-15 (3,500 kwh, )...9 Figure 6: National differences in end-user prices for households (3,500 kwh, , nominal) 10 Figure 7: National differences in end-user prices for households (3,500 kwh, , real) Figure 8: Cumulative change in end-user prices for households (3,500 kwh, ) Figure 9: Evolution of end-user prices for households in the new Member States Figure 10: Main components of end-user prices...15 Figure 11: Share of different price components in industrial end-user prices (last available year) Figure 12: Share of different price components in household end-user prices (last available year) Figure 13: Evolution of prices and share of taxes (excl. VAT) for industrial users (24 GWh, )20 Figure 14: Share of taxes (excl. VAT) for industrial users (24 GWh, 1995 vs. 2004) based on EUROSTAT Figure 15: Evolution of prices and share of taxes (incl. VAT) for households (3,500 kwh, )22 Figure 16: Share of taxes (incl. VAT) for households (3,500 kwh, 1995 vs. 2004) Figure 17: Fuel mix in the EU-15 (2000) Figure 18: Evolution of oil and coal prices ( ) based on nominal prices in Euro Figure 19: Evolution of gas prices (ex-vat) in the EU countries (41860 GJ, , nominal) Figure 20: Nominal wholesale prices based on national power exchanges (2002=100) Figure 21: Average exchange rates to the EURO (1995=100) Figure 22: Inflation in the EU-15 ( ) Figure 23: 2003 Share of national consumption...41 Figure 24: Price evolution for industrial users using a simple average (24 GWh, ) Figure 25: Price evolution for industrial users using a weighted average (24 GWh, ) Figure 26: Main components of end-user prices...43 Figure 27: Cost components for households in Austria ( ) Figure 28: Cost components for industrial consumers in Austria (24 GWh, ) Figure 29: Cost components for households in Belgium ( ) Figure 30: Cost components for households in the Czech Republic ( ) Figure 31: Cost components for industrial consumers in the Czech Republic ( ) Figure 32: Cost components for households in Denmark ( ) Figure 33: Cost components for industrial consumers in Denmark ( ) Figure 34: Cost components for households in Estonia ( ) Figure 35: Cost components for households in Finland ( ) Figure 36: Cost components for industrial consumers in Finland ( ) Figure 37: Cost components for industrial consumers in France ( ) Figure 38: Cost components for households in Germany ( ) Figure 39: Cost components for industrial consumers in Germany ( ) Figure 40: Cost components for industrial consumers in Greece ( ) Figure 41: Cost components for households in Hungary ( ) iii

5 Figure 42: Cost components for industrial consumers in Hungary ( ) Figure 43: Cost components for households in Ireland ( ) Figure 44: Cost components for industrial consumers in Ireland ( ) Figure 45: Cost components for household in Italy ( , captive customers) Figure 46: Cost components for industrial consumers in Italy ( ) Figure 47: Cost components for households in Latvia ( ) Figure 48: Cost components for industrial consumers in Latvia ( ) Figure 49: Cost components for industrial consumers in Lithuania ( ) Figure 50: Cost components for households in Luxembourg ( ) Figure 51: Cost components for industrial consumers in Luxembourg ( ) Figure 52: Cost components for households in the Netherlands ( ) Figure 53: Cost components for households in Norway ( ) Figure 54: Cost components for industrial consumers in Norway (4 GWh, ) Figure 55: Cost components for households in Poland ( ) Figure 56: Cost components for industrial consumer in Poland ( ) Figure 57: Cost components for average users in Portugal ( ) Figure 58: Cost components average households in Slovakia ( ) Figure 59: Cost components for average industrial users in Slovakia ( ) Figure 60: Cost components for average households in Slovenia ( ) Figure 61: Cost components for average users in Spain ( ) Figure 62: Cost components for average households in Spain ( ) Figure 63: Cost components for average industrial consumers in Spain ( ) Figure 64: Cost components for households in Sweden ( ) Figure 65: Cost components for industrial consumers in Sweden (2-10 GWh, ) Figure 66: Cost components for households in the United Kingdom ( ) Figure 67: Cost components for industrial consumers in the United Kingdom ( ) iv

6 1. Introduction Starting with the adoption of the first Electricity Directive back in 1996, the European electricity markets have been gradually liberalised over the past 10 years. The overall objectives of this process have been to provide additional benefits to European consumers and to enhance the competitive position of the European economy by creating a common European electricity market. Liberalisation and market opening have been aimed at increasing efficiency and introducing competition into power supply, in order to provide European consumers with safe and reliable supply of electricity at reasonable prices. Ten years after the start of this process, a review of this development is made to assess the results that have been achieved to date. This report is therefore part of an initiative by the Union of the Electricity Industry EURELECTRIC which aims to provide a solid and evidenced basis for discussions with external stakeholders. More specifically, EURELECTRIC contracted KEMA Consulting to collect and summarise data on the evolution of electricity prices for the period 1995 to Besides the general evolution of end-user prices over the last 10 years, EURELECTRIC has also requested a more detailed analysis of the price evolution since 2000, including a breakdown of end-user prices into major price components. The overall objective of this report is to gather empirical evidence and present, to the extent possible, a concise descriptive picture of the development of electricity prices in the EU (and Norway) over the last 10 years. KEMA Consulting has carried out this project based on the Guidance Document provided by EURELECTRIC. This report provides facts and observations on price developments. KEMA Consulting has made exclusive use of publicly available data. In addition, various meetings have been held with the EURELECTRIC Task Force Price Evolution and external stakeholders. KEMA Consulting are also grateful to a number of internal and external stakeholders who have assisted us in identifying, collecting and interpreting the relevant sources of information. Finally, it should be emphasised that this report focuses on price developments, i.e. relative price movements, but not on the absolute price level in different countries. The remainder of this report is structured as follows: In section 2, brief comment is made on the approach to data collection and treatment, and the selection of customer groups for further analysis. Section 3 summarises the general evolution of end-user prices over the last 10 years. In section 4 consideration is given to the three main price components and their evolution over the past 5 years. In addition, a comparison of the development of these price components and of a number of potential cost drivers has been made, before concluding the report with some remarks and observations in section 5. 1

7 2. General Approach The overall objective of this report is to provide a concise descriptive picture of the evolution of final end-user prices for electricity in the European Union (and Norway). Apart from the collection and treatment of information, the main tasks under this project were to: Analyse general trends of selected categories of end-user prices over the last 10 years ( ) 1 To the extent reasonably possible, break down end-user prices into relevant price components over the last 5 years ( ); and Describe the evolution of important potential cost drivers. In general, the analysis considers the following countries: EU 15 + Norway: For the analysis of general price trends ( ) EU 25 + Norway (excluding Cyprus and Malta): For the detailed analysis of price components ( ) Below, brief comment is made on the main data sources used, the customer categories considered and the approach taken to comparing prices from the different countries and years. More details on the approach and assumptions can be found in the technical notes at the end of this report (Appendix 1). Data from the following sources have been used (see also section 6.1.2): Centralised data: within this category, data published by international organisations, namely EUROSTAT (end-user prices for electricity and gas, and inflation), ERRA (electricity prices for accession countries), UCTE / NORDEL (physical data) and EURELECTRIC (EURPROG - consumption), have been used. National data: The centralised data have been supplemented by collecting information on a national level, including end-user prices, network charges, taxes, fuel, and wholesale prices, from various regulators (e.g. E-Control, CREG, STEM etc.), national statistical offices (e.g. Norway, Sweden), industry associations (e.g. VDEW, VDN) and power exchanges. 1 It must be noted that our analysis does not consider data from 2005 and therefore does not consider the price evolution in 2005 or forward prices for future years. For the same reason, our current analysis has not yet considered e.g. the impact of carbon emission prices on power prices. 2

8 Individual prices and published tariffs: In several countries, publicly available price or tariff information from individual companies has been used. Where possible, such information has been aggregated and an average across several companies has been used. To allow for a meaningful comparison of price information from all countries considered under this study, the analysis has been limited to the following customer groups: Households (EUROSTAT cat. Dc) with an annual consumption of 3,500 kwh that are connected to low-voltage networks; and Industrial consumers (EUROSTAT cat. Ig) with an annual consumption of 24,000 MWh, a maximum demand of 4000 kw and an annual utilisation of 6000 hours that are connected to medium-voltage networks. These two customer categories are consistent with those defined in the Council Directive 90/377/EEC of 29 June 1990 and are also used in the EU Benchmarking Reports. Whilst these groups do only cover a limited share of total consumption, some supplementary analysis (compare section 6.1.3) indicates that they are reasonably representative for most types of consumers. Despite some differences in the evolution over time, there is generally a high degree of correlation showing that these two customer categories can be considered representative for the general trends of the national electricity markets. For both customer groups, KEMA Consulting has alternatively used national data for the same or (where necessary) a similar customer category if no, or only incomplete, data was available from EUROSTAT. 2 In order to take account of national differences and the time period considered, the following approach has been applied to all prices when including them in the comparison (see also section 6.1.4): Exchange rates: All end-user prices are based on values in local currency, which removes the potential impact of exchange rate fluctuations; Average Prices: Where KEMA Consulting has had to rely on detailed tariff information, sometimes with multiple elements, this has been converted into annual average payments per kwh; Use of regional averages: Where end-user prices and/or network charges vary regionally, an average figure has been used, preferably based on a representative sample of companies; It must be noted that in some cases discrepancies exist between national data and EUROSTAT data. In the case of Sweden, we have instead used the median as national authorities already report this value. 3

9 Inflation nominal vs. real prices: Prices are presented in both nominal terms and real terms, i.e. in current and historic prices. Real prices have been determined based on the national inflation rates published by EUROSTAT. Conversely, average EU inflation rates have been applied to the aggregated EU indicator 4 ; Taxes: For household customers, all taxes, including VAT, have been taken into account. Conversely, prices exclusive of VAT for industrial consumers have been used; Indexation: Since this analysis focuses on the (relative) evolution of prices in different countries, price indices for all comparisons between countries have been used. In practice, all prices in our analysis are indexed to the first year (e.g. 1995), which is defined as 100; and Weighting: Where no aggregated EU-wide indicator was available, weighted prices from the various countries based on their national consumption (in 2003) have been used. 4 This is the case for the customer category with a consumption of 3500 kwh since EUROSTAT publishes an aggregated indicator for this category. 4

10 3. Price Evolution Over the Last 10 Years In this section, KEMA Consulting present the evolution of end-user prices over the last 10 years, i.e. since the time before adoption of the first Electricity Directive in The first two sections describe the development within the EU-15 (+ Norway), i.e. in those countries that initially embarked upon liberalisation under the 1996 Directive. In accordance with the selection of customer groups discussed above, section 3.1 illustrates the evolution of electricity prices for industrial consumers, whilst section 3.2 provides the same information for domestic customers. In contrast, the analysis of end-user prices (domestic customers only) in the new Member States has been kept separate (section 3.3) for two reasons. First, the 1996 Electricity Directive did not immediately apply in these countries. Secondly, most of these countries have been undergoing a transformation from socialist to market economies, often implying the need to gradually remove cross-subsidies and increase electricity prices to a level that allows for recovery of costs. Based on these considerations, it seems reasonable to suppose that the development may have been different in these countries. Please note that this chapter does not differentiate between different price components; this analysis is the subject of chapter 4. Moreover, all prices include taxes (for industry: without VAT) and are shown in nominal and real terms both at an aggregate level and on a country basis Development of Electricity Prices for Industrial Users Figure 1 shows the evolution of electricity prices for industrial users with an annual consumption of 24 GWh from 1995 to 2004 using a weighted average. The national consumption of each country has been used as a parameter for weighting prices and creating a weighted price for the entire EU based on consumption data for the year 2003 (see section 6.1.4). In both real and nominal terms, one may observe a strong decrease until 1999/2001. This amounts to 21% in real terms and some 13% in nominal terms compared to This decrease has been followed by an increase in prices in both real and nominal terms in recent years. For instance, prices in real terms stagnated between 2000 and 2002 but have since increased to a level corresponding to 85% of the 1995 price level. Nominal prices, on the other hand, have risen again since reaching their lowest point in the year 2000 and almost reached the 1995 price level in

11 This development thus shows that although prices have increased in real terms in recent years, they still remain some 15% below their 1995 level. This observation implies that the average industrial customer in those countries considered in Figure 1 paid significantly less for electricity in the year 2004 than 10 years ago when general inflation is taken into account. In nominal terms, the development shows that the initial marked decrease in nominal prices had been more or less fully made up by 2004, with only a negligible decrease (0.2%) versus the 1995 level = Nominal Real terms Countries included (12): Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, UK Figure 1: Evolution of end-user prices for industrial users (24 GWh, ) Note: Prices exclude VAT; weighted average; prices in real terms based on the inflation for the EU-15; the following countries have been considered: Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Spain, the UK and Norway (excluding Norway these countries represent 87% of the EU-15 and 78% of the EU-25 in terms of total consumption); Only those countries where prices were available for the entire period ( ) have been included. To complement the illustration of a EU-wide indicator, Figure 2 and Figure 3 present the national evolution of end-user prices for industrial consumers in the same countries that have also been considered in Figure 1. These two figures show significant differences between individual countries. Besides rather different patterns over time, significant variations can be seen in the resulting cumulative changes in electricity prices between 1995 and 2004, ranging between a reduction of 41% and an increase of 34% in real terms, or - 33% to +58% in nominal terms. 6

12 Belgium Finland France Germany Greece Ireland Italy Luxembourg Norway Portugal Spain United Kingdom 1995= % Norway -33% UK Figure 2: National differences of end-user prices for industrial users (24 GWh, , nominal) Note: Prices exclude VAT, based on EUROSTAT data Belgium Finland France Germany Greece Ireland Italy Luxembourg Norway Portugal Spain United Kingdom 1995= % Norway -41% UK Figure 3: National differences in end-user prices for industrial users (24 GWh, , real) Note: Prices exclude VAT, based on EUROSTAT data and national inflation rates To better illustrate the cumulative change over the entire period, Figure 4 shows the total variation in end-user prices between 1995 and 2004 for the same countries, again in nominal and real terms. The fact that four of the five largest countries (France, Germany, Spain and the UK) are among the countries with the largest price reductions partially explains why the weighted indicator shows an overall decrease at European level despite significant price increases in some other countries. 7

13 Norway 34% 58% Finland 15% 32% Italy 3% 29% Ireland 1% 34% Germany -9% 2% Belgium -13% 1% Greece -14% 23% EU 11+Norway -16% 0% France -23% -11% Luxembourg -24% -8% Portugal Spain -35% -26% -16% -5% Nominal Real terms United Kingdom -41% -33% -50% -30% -10% 10% 30% 50% 70% Figure 4: Cumulative change in end-user prices for industrial users (24 GWh, ) Note: Prices exclude VAT based on EUROSTAT data and national inflation rates 3.2. Development of Household Electricity Prices for Households in the EU-15 Similar to the case of industrial consumers in the previous section, Figure 5 shows the evolution of final electricity prices for households in both real and nominal terms (including all taxes), based on the EU-indicator for the electricity price calculated by EUROSTAT (weighted average). In principle, nominal prices show a similar pattern as in the case of industrial users, i.e. a decrease until 1999, followed by increasing prices thereafter. Due to the limited extent of this variation, which does not exceed 2.5%, one may alternatively conclude that nominal household electricity prices have largely stagnated over the entire period. Households in those countries shown in Figure 5 thus paid virtually the same amount for electricity in 2004 as 10 years earlier. In contrast, prices have been constantly decreasing in real terms over the entire period. Overall, household prices in real terms were thus some 15% lower in the year 2004 than a decade before, indicating substantial benefits for this customer group. 8

14 = Nominal Real terms Figure 5: Evolution of end-user prices for households in the EU-15 (3,500 kwh, ) Note: Prices include VAT based on EUROSTAT indicator (supplemented by 1995 price information for Austria and Sweden from UNIPEDE publications); prices in real terms based on the average inflation for the EU-15. In Figure 6 and Figure 7, the same information is presented on a national level. Similar to the case of industrial users, one may observe significant differences between individual countries, especially with respect to the cumulative change over the entire period. In nominal terms, this figure ranges between -18% and +87%, whilst the respective numbers in real terms are between -28% and +50%. 9

15 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Norway Portugal Spain Sweden United Kingdom % Netherlands = % UK Figure 6: National differences in end-user prices for households (3,500 kwh, , nominal) Note: Prices include VAT based on EUROSTAT data Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Norway Portugal Spain Sweden United Kingdom % Netherlands = Figure 7: National differences in end-user prices for households (3,500 kwh, , real) Note: Prices include VAT based on EUROSTAT data and national inflation rates -31% Spain 10

16 Similar to the case of industrial users, it is important to note that the evolution of the EU-wide indicator is strongly influenced by the development in the 5 largest countries (Germany, France, UK, Italy and Spain). These countries, which all show decreasing prices in real terms, account for some 2/3 of the European consumption (compare Figure 23 on page 41). Conversely, prices have mainly increased in smaller and medium-sized countries, such as Denmark, Ireland, Netherlands, Luxembourg or Finland. Netherlands Norway Sweden Denmark Ireland Finland Luxembourg Austria Germany EU 15 Belgium Portugal France Italy United Kingdom Greece Spain -1.0% -15.3% -2.0% -15.9% -19.1% -10.9% -23.0% -6.6% -25.0% -17.8% -27.9% -28.9% -11.0% -30.8% 13.9% 8.4% 3.4% 14.7% 0.2% 10.8% 0.1% 4.4% 1.8% 36.2% 30.5% 27.4% 24.7% 24.2% 50.1% 49.2% 51.8% 50.4% 60.4% Nominal Real terms 86.5% -50% -30% -10% 10% 30% 50% 70% 90% Figure 8: Cumulative change in end-user prices for households (3,500 kwh, ) Note: Prices include VAT based on EUROSTAT data and national inflation rates 3.3. Development of Household Electricity Prices in the New Member States The previous section analysed the evolution of household electricity prices in the EU- 15 (+ Norway), i.e. in those countries that initially agreed upon the first Electricity Directive in The following text provides the corresponding results for five of the ten New Member States which joined the EU in This presentation is again based on an aggregated indicator for the evolution of household electricity prices in both nominal and real terms (including all taxes). However, in this case, the simple average is used, 5 based on national data. 5 Given the differences in size, Poland represents more than 2/3 of total consumption in this group. Applying the weighted average would therefore result in an obvious dominance of Polish prices in the results. 11

17 In contrast to the EU-15, Figure 9 shows a constant and rapid growth of household electricity prices over the entire period, which grew by almost 90% in nominal terms. This indicates a significant difference in the evolution of end-user prices in the old vs. the new Member States. This observation is confirmed by the development of end-user prices in real terms, which have remained relatively stable (with a limited increase especially in the early years) in the new Member States. This is again rather different from the EU-15 where Figure 5 has shown a constant decrease, equal to a cumulative reduction of 15% until Finally, it is interesting to note that the difference between prices in real and nominal terms in the EU-15 amounts to some 15% at the end of the 10-year period. In contrast, stagnating prices in real terms in the new Member States correspond to an increase in nominal prices of almost 90%. This difference obviously is a result of significantly higher inflation in the new Member States compared to the EU-15 over the period under consideration. Overall, these findings confirm our initial assumption that the development has been rather different in the Central and Eastern European countries than in the EU-15. Whilst consumers in the EU-15 have obviously benefited from a reduction in electricity prices in real terms, this is not the case for domestic customers in the new Member States. However, the development of nominal prices is obviously distorted by a significant difference in inflation. Evolution in nominal terms Evolution in real terms Latvia Poland Slovenia Estonia Hungary Simple average Latvia Poland Slovenia Estonia Hungary Simple average Figure 9: Evolution of end-user prices for households in the new Member States Note: 3500 kwh, simple average ; prices include VAT; based on national data; prices in real terms based on national inflation; Only those countries where prices were available for the entire period ( ) have been included, i.e. Estonia, Hungary, Latvia, Poland and Slovenia. 12

18 3.4. General Observations At first sight, an analysis of the price evolution for industrial and household customers in the EU-15 seems to indicate a similar development. Electricity prices have decreased over the entire period by approximately 15% in real terms, whilst the cumulative changes are negligible for both customer groups in nominal terms. At a European level, both households and industrial customers thus paid considerably less for electricity in 2004 when measured in 1995 prices. A closer look, however, reveals significant differences. First, the cumulative change in this weighted indicator (which is also based on a different number and selection of countries) is clearly the result of a different pattern of evolution for these two customer groups. For industrial consumers, both nominal and real prices show a significant reduction in the beginning, followed by a marked increase in recent years. In contrast, household prices have shown only a very limited variation in nominal terms, but a constant decrease in real terms. Secondly, our analysis reveals significant differences between individual countries for both customer categories. Apart from the difference between households and industrial users, it is thus impossible to identify a clear trend for either of these two groups that would apply to all countries. Moreover, while consumers have clearly benefited from the evolution of end-user prices in some countries, they obviously had to pay more in 2004 than in 1995 in other countries. Thirdly, our separate analysis of the new Member States has shown that the development in this region has obviously been rather different from the EU-15. Whilst households in the EU-15 have been able to enjoy considerable benefits, domestic customers in Central Eastern Europe paid slightly more in 2004 than in 1995 when measured in real terms, corresponding to an increase of almost 90% in nominal terms. This represents a significant difference and suggests that the development in this region may not be comparable to the EU-15, at least in the first part of the period under study. In summary, our observations indicate that, despite some clear trends at a regional level, the evolution of end-user prices has been rather different across the EU and for household vs. industrial consumers, as well as between the new and the old Member States. Furthermore, it should be noted that these prices do not only include the costs of energy but also network charges, plus taxes and other governmentally imposed levies or surcharges. 13

19 4. Analysis of Relevant Price Components 4.1. Introduction In section 3, the evolution of end-user prices has been analysed. Clearly, these are influenced not only by the costs of energy as the primary product, but also by the costs of the network and a number of taxes and other payments resulting from governmental and/or political decisions. In this section, we therefore make an attempt at breaking down end-user prices into their relevant price components. However, prior to and in the early years of liberalisation, electricity prices were not usually unbundled into different components, such as energy and network components. For this reason, the subsequent analysis is generally limited to the last 5 years ( ) or, more specifically, the period for which corresponding data was available. 6 In general, the following analysis differentiates between three main groups of price components (compare Figure 10 / section 6.1.5): Network charges: This component includes all regular payments for connection to and use of the system, including transmission and distribution charges, payments for system services, metering charges etc., which are charged to consumers; 7,8 Taxes, levies and surcharges: Besides taxes and other official levies, this category also includes other surcharges that are imposed by governmental / regulatory decisions. Please note that this component is limited to those costs or charges that can be directly allocated to the end-use of electricity, such as purchase obligations for energy from renewables or CHP, stranded cost levies, surcharges for public service obligations etc. It must be emphasised that these costs are not always explicitly invoiced to customers but are sometimes included in the network tariff or paid for by the generators/suppliers; As a general rule, we have therefore only considered detailed data from the time when network / use-ofsystem charges were first published as a separate price component, but not for any years before 1999 or Please note that we thus do not consider network charges paid by producers under this component. In corresponding cases, these costs are by definition part of the residual costs. Please note that the term network charges is used whenever the total of all corresponding charges, including use of the transmission and distribution system, is referred to. Conversely, the terms transmission and distribution are used when consumers have to pay separately for these services. 14

20 Residual costs ( energy component ): This final component represents the residual share of the final end-user price that cannot be allocated to either of the two other categories. It can therefore be accepted as a reasonable proxy for the price actually paid to the supplier for the energy. However, in some cases this also includes some surcharges paid by supplier/producer, which are not directly attributable to end-users. 9 Transmission, distribution Tax, levies & surcharges Network charges Other Regulated / administrated (no competition) Costs of energy Figure 10: Main components of end-user prices Energy Market-based prices (competition) Similar to final end-user prices, the different price components have been separately determined for each country and for each category of consumers. The results of this analysis are summarised in the following section. Thereafter, focus is on the impact of taxes. This part of the analysis is facilitated by the fact that EUROSTAT provides a consistent methodology across countries that takes into account different levels of taxation. Despite some remaining national variations, 10 this allows us to separate the impact of taxes on end-user prices, even over the entire 10-year period. In a second step, the other components of end user prices are then considered, i.e. primarily network charges but also the remaining levies and surcharges that are not considered as taxes within EUROSTAT data. Since significant differences exist between countries, a brief comment is made on the general trends that can be observed, whilst the detailed results for each country are presented in Appendix 2 (section 6.2) In several countries, there may be additional costs imposed on e.g. producers and/or on e.g. a lump sum basis suppliers. Whilst such elements clearly represent costs imposed by governmental/regulatory decisions, we have not considered them, unless there was a clear and transparent basis for allocating the corresponding cost to individual final customers. Many countries have adopted additional national approaches to consider the costs of renewables, stranded assets or public service obligations, sometimes considering them as taxes and sometimes not. Moreover, while these additional charges are clearly separated and allocated to end users in some countries, they are directly or indirectly included in the costs of energy and/or in transport tariffs in other countries. 15

21 In addition to the separation of different price components, the development of selected potential cost drivers, such as fuel prices, as well as the evolution of wholesale electricity prices are finally presented Overview of Price Components Based on the approach mentioned above, end-user prices have been split into different price components. This section presents the relative share of the three categories of components for the last available year (usually 2004). 11 Although it would have been desirable to consider a longer time period, the period for which the price components can be separated from the end-user prices varies considerably. Detailed information for each country, including the underlying sources and assumptions, as well as an illustration of the resulting components over time, can be found in the corresponding country sections in Appendix 2 (section 6.2). Figure 11 illustrates the share of the different price components for industrial users. Residual costs (incl. energy) clearly represent the largest part in most countries, with the exception of Denmark where taxes, levies and surcharges account for more than 60% of the total price, whilst the residual costs account for less than 20%. However, in the case of Denmark, taxes, levies and surcharges also contain purchases from priority production, which amount to a significant share of total consumption (approx. 30% - 50%) and represent more than 30% of the final end-user price. 12 When correcting for this specific aspect, 13 the residual costs clearly exceed the share of network charges in all countries, on average by a factor of 3. Nevertheless, there still remain considerable variations between different countries: The share of residual costs (including energy) ranges only as high as 40 50% in Denmark, it amounts to approx. 80% in Hungary and Greece. Similarly, the share of network charges is below 15% in e.g. Austria, Hungary or the UK, but may be as high as 33 36% in Latvia, Norway, Poland and the Czech Republic Although we have generally used 2004 as the reference year, it has not always been possible to obtain sufficient data for that year. In some cases, we have therefore had to revert to 2003 data for this part of the comparison. In addition, it should be noted that the Danish prices are based on consumers with an annual consumption of 10 GWh, i.e. not 24 GWh as for most other countries. Similarly, the prices for the other Scandinavian countries are based on lower levels of consumption (2 10 GWh). Assuming that the costs of priority production in Denmark can be split approximately evenly into taxes, surcharges and levies and the residual costs. 16

22 Similarly, Figure 11 also shows significant differences with regard to the impact of governmentally-imposed costs. As already mentioned and as further discussed in section below, explicit taxes, levies and surcharges may represent some 50% of the total price in Denmark. Similarly, some 30% of the price paid by industrial consumers in Austria and Germany can be attributed to taxes or other costs imposed by the government. In contrast, electricity consumption by industrial users is subject to no or only negligible taxation and similar costs in e.g. the Czech Republic, Greece, Hungary, Lithuania, Luxembourg, Norway, Poland, Slovakia and Spain. These numbers indicate significant differences with regard to the direct governmental impact on electricity prices in different countries. Finally, it should be noted that the share of taxes, levies and surcharges may well be higher in several countries since the numbers shown in Figure 11 do not take into account any other taxes or charges that are levied on generators or suppliers which cannot be easily attributed to individual consumers. In these cases, the corresponding costs are included in the residual cost component. 100% 80% 60% 40% 20% 0% Austria (24) Czech (24) Denmark (10) Finland (24) France (24) Germany (24) Greece (24) Hungary (24) Italy (24) Latvia (24) Lithuania (24) Luxembourg (24) Norway (24) Poland (24) Slovakia (average) Sweden (2-10) UK (24) Residual cost (incl.energy) Network charges Taxes, levies and surcharges Figure 11: Share of different price components in industrial end-user prices (last available year) Note: Based on national data (see Appendix); levels of consumption are mentioned in brackets (GWh). Figure 12 shows the corresponding figures for the case of household customers. On average, residual costs represent the largest component (39%), followed by network charges (35%), while taxes, levies and surcharges account for some 26%. In comparison to industrial consumers, households thus face significantly higher governmentally-imposed charges. This can obviously be explained inter alia by the fact that household prices include VAT (compare also section below). When only considering those costs associated with the electricity industry, the prices paid for use of the system by households are largely comparable to the residual element (incl. energy). This again contrasts with the corresponding numbers for industrial customers (see above). In this context, it should be noted that households are usually connected to low voltage networks, whereas the prices for industrial consumers are based on a supply from medium or high voltage networks. 17

23 Apart from the average numbers, the individual observations again vary significantly. For instance, the share of taxes, levies and surcharges varies from under 10% in the UK to over 40% in Germany, even when neglecting the special case of Denmark. Similarly, network charges account for some 20% of the total price in e.g. Denmark, Estonia, Finland and Italy, while more than 50% of the price paid by Belgian and Norwegian households can be attributed to the network charges. Finally, residual costs, including the energy cost, represent less than a quarter of the final end-user price in e.g. Belgium, Denmark, Germany and Norway, that is to say more than 75% of the final end-user price for households in these countries is determined by governmentally-imposed or regulated charges. In contrast, energy and other residual cost elements account for more than 50% of the final price in e.g. Estonia, Finland, Italy and the UK. In summary, these observations thus again reveal significant variations between different countries. 80% 60% 40% 20% 0% Austria (3500) Belgium (3500) Czech (3500) Denmark (3500) Estonia (3500) Finland (3500) Germany (3500) Hungary (average) Italy (3500) Latvia (3500) Luxembourg (3500) Netherlands (3500) Norway (3500) Poland (average) Slovakia (average) Slovenia (average) Sweden (3500) UK (3500) Residual cost (incl.energy) Network charges Taxes, levies and surcharges Figure 12: Share of different price components in household end-user prices (last available year) Note: Based on national data (see Appendix); levels of consumption are mentioned in brackets (kwh). 18

24 4.3. Factors Influencing Electricity Prices Taxes EUROSTAT provides three categories of prices: (i) prices without taxes, (ii) prices without VAT, and (iii) prices including all taxes 14. Whilst no distinction is made for the share of network charges or the cost of energy, this differentiation allows an analysis of the impact of taxation at a high level. This section therefore uses EUROSTAT data to show the evolution of prices with and without taxes (and/or VAT) following EUROSTAT categorisation and the development of the share of taxes in final enduser prices. Figure 13 shows the development of the relevant indicators for industrial consumers (24 GWh) based on a weighted indicator for the EU. For most of the time, the development of end-user prices with and without taxes basically shows the same pattern, indicating largely constant tax payments. Since 2002, however, one can observe an increasing gap, with post-tax prices rising quickly, whereas pre-tax prices only show a moderate increase, or even a decrease from 2003 to This observation can also be confirmed by the relative share of taxes. While this figure remained in a relatively narrow range of some 3% 5% between 1995 and 2002, it has since risen to more than 11% in As a result, it appears that industrial consumers have recently been exposed to a significantly increased direct tax burden. Moreover, the increase in taxes obviously represents a substantial share of the total increase in end-user prices for industrial customers in recent years Please note that beside VAT, the exact definition of taxes differs amongst countries and that differences in the application of the current EUROSTAT methodology in the 25 EU member states can occur since each state has its own tax regime. As a principle, the countries are requested to put all kind of taxes into the second group of price. For additional information on this issue please refer to the new handbook published by EUROSTAT entitled Electricity price systems 2004 that provides information about the electricity price systems applied in each EU member states. Please note that the share of taxes also depends on the absolute level of pre-tax prices. 19

25 Share of taxes (%) Price without VAT Price without taxes 1995=100 for price without VAT % Countries included (12): Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, UK 2.3% 2.7% 3.8% 3.8% 4.8% 4.1% 5.2% 8.3% 11.5% 12% 10% 8% 6% 4% 2% % Figure 13: Evolution of prices and share of taxes (excl. VAT) for industrial users (24 GWh, ) Note: Based on weighted average; absolute values shown in nominal terms based on EUROSTAT Figure 14 compares the level of taxation in individual countries at the beginning (1995) and the end (2004) of the period under study based on EUROSTAT data. This depiction clearly illustrates considerable differences in (explicit) taxation, ranging between zero in e.g. Greece and Portugal and some 16% in Italy and Germany. It should be noted that these shares only relate to explicit taxes, but do not take into account any other taxes, levies or surcharges that may be implicitly included in final end-user prices. The figure indicates that industrial customers are exposed to a significantly higher direct tax burden, and thus costs, in some countries than in others. Moreover, it is interesting to note that 8 out of 10 countries that did not charge any specific taxes on electricity in 1995 had introduced corresponding taxes by In addition, the share of taxes in final end-user prices had approximately doubled in Germany, in contrast to a decreasing share of taxes in Italy. Figure 14 thus confirms that increasing taxes have obviously been an important factor explaining increasing electricity prices for industrial customers. 20

26 % 16% 14% 12% 10% 8% 6% 4% 2% 0% Greece Portugal Ireland Belgium Luxembourg UK Spain Finland France EU+Norway Norway Italy Germany Figure 14: Share of taxes (excl. VAT) for industrial users (24 GWh, 1995 vs. 2004) based on EUROSTAT Note: Share of taxes does not include any other levies and surcharges (in contrast to Figure 11); Norwegian data obviously based on full energy consumption fee of 9.67 Oere/kWh (reduced rate for industry: 0.45 Oere/kWh) As illustrated by Figure 15, taxes represent a significantly higher share of household electricity prices than is the case for industrial customers. This can also be explained inter alia by the fact that VAT is also taken into account in this case. Nevertheless, in contrast to industrial users, a notable difference can be seen in the development of pre-tax as opposed to post-tax prices. Whilst nominal post-tax prices have largely remained stable, pre-tax prices show a clear and constant downward trend. For the selection of countries shown in Figure 15, total payments (per kwh) to the electricity industry, including the costs of energy and the network, thus seem to have decreased by some 5%. This observation is confirmed as, in a situation of nearly constant post-tax prices, the share of tax rose from 18.5% in 1995 to almost 24% in 2004, i.e. by almost a third of its original value or 5.5% of total end user prices. 16 Our analysis thus indicates that, had governments not increased taxes on electricity consumption, households would have seen considerable benefits from decreasing electricity prices over the past 10 years. 16 Please note the marked increase of more than 2% from 1999 to

27 Share of taxes (%) Price all taxes included Price without taxes 1995=100 for price all taxes included % 18.4% 19.3% 19.7% 19.8% 22.0% 22.1% 23.0% 23.7% 23.8% 25% 24% 23% 22% 21% 20% 19% 18% 17% 16% % Figure 15: Evolution of prices and share of taxes (incl. VAT) for households (3,500 kwh, ) Note: Based on EUROSTAT aggregated indicator for EU 15; absolute values shown in nominal terms based on EUROSTAT To supplement the analysis at EU level, Figure 16 again compares the share of taxes in individual countries in 1995 and Similar to the case of industrial consumers, this figure shows major differences, with the level of taxation ranging from approx. 5% in Portugal and the UK, on the one hand, to some 60% in Denmark. In some countries, taxes thus represent a major, if not the major share of final end user electricity prices. Again, one can observe an increasing share of electricityspecific taxes, or the introduction of corresponding taxes in most countries. The only exceptions are France, the UK and Greece, where the share of taxes has (slightly) decreased. In contrast, household customers in Austria and Netherlands have been exposed to a dramatic increase in taxation. Overall, Figure 16 thus confirms that increasing taxes have obviously also been an important factor in preventing a fall in end user prices. 22

28 % 60% 50% 40% 30% 20% 10% 0% UK Portugal Greece Luxembourg Ireland Spain Belgium France EU 15 Finland Germany Italy Norway Austria Sweden Netherlands Denmark Figure 16: Share of taxes (incl. VAT) for households (3,500 kwh, 1995 vs. 2004) Note: Share of taxes does not include any other levies or surcharges (in contrast to Figure 12) In conclusion, this analysis shows that the level of taxation at the EU level has significantly increased during the last 10 years for both customer categories analysed. In both cases, the share of taxes has increased by more than 5% of final end user prices, with most of this increase occurring in the past 5 years. Beyond these aggregated figures, one can observe significant differences between individual countries. Besides differences in the evolution of taxes in these countries, the level of taxation varies widely between countries for the two customer groups Fuel prices In Europe, most electricity production is based on just five technologies: nuclear, coal, gas, hydro and oil (compare Figure 17). In this section we focus on the evolution of coal, oil and gas prices, which - since fuel costs represent a significant share of the variable costs of the corresponding types of power plants - are likely to exert a substantial influence on the price of electricity. By contrast, we have decided not to take account of price developments for uranium and water for various reasons. Firstly, variable costs only account for a minor share of total costs for both hydro and nuclear technologies and are therefore unlikely to have a significant influence on electricity prices. In addition, while it is true that the hydrological situation does have a significant influence on wholesale prices in some markets, the actual price of hydropower is determined by the value of water 17 and is thus highly dependent on the availability of water, but it is far from simple to determine its value, given that no 17 The value of water can be defined as the avoided fuel costs (opportunity costs) for using thermal plants at the present or a future point in time. 23

29 corresponding measurement exists that is easily and publicly available for all countries. Other Renewables 4% Others 2% Nuclear 22% Hydro Power 21% Gas 20% Coal 25% Oil 6% Figure 17: Fuel mix in the EU-15 (2000) Source: EURPROG Figure 18 presents the evolution of coal and oil prices from 1995 until Besides crude oil prices, this depiction also shows the price evolution of heavy fuel oil, which can be considered as more representative of the costs of power production. The Rotterdam average spot price of heavy fuel oil (3.5% sulphur) was used. For coal prices, the average spot prices of coal with a maximum sulphur content of 1% delivered to North West European ports was used. 18 Figure 18 indicates that coal and oil prices have increased by approximately 60% and % respectively. Oil prices show a higher volatility, with a limited increase or even a decrease in the first years, followed by a steep increase since In contrast, coal prices generally decreased until 1999 but have dramatically increased since Please note that this increase in coal and oil prices coincides with the increase in end-user electricity prices discussed in chapter 3 above. 18 Based on information by the German Coal Importer Federation (Verein der Kohlenimporteure) 24

30 Steam Coal Marker Price, 1% S, CIF NWE Average of Refiner Acquisition Cost of Imported Crude Oil Heavy fuel oil 3.5% = Figure 18: Evolution of oil and coal prices ( ) based on nominal prices in Euro In contrast to coal and oil, an overall recognized indicator for European gas prices does not exist. While there have been quoted market prices for gas in e.g. the UK, gas prices in most continental European countries remain directly linked to oil prices and/or to national regulation, without, moreover, always being published. As an alternative, we have placed reliance on gas prices reported by EUROSTAT. More specifically, Figure 19 shows the evolution of nominal gas prices (excl. VAT) using EUROSTAT data for gas users with an annual consumption of GJ and a load factor of 200 days (1600 hours) for different EU countries. Despite some national differences, it can be observed that there is a significant increase of some 25% - 50% over the 10-year period. In particular, a strong increase between 1999 and 2001 is noted, followed by a relatively stable price level thereafter. 25

31 Belgium Denmark Germany Spain France Luxemburg Austria Finland UK = % Figure 19: Evolution of gas prices (ex-vat) in the EU countries (41860 GJ, , nominal) Source of data: EUROSTAT In summary, our analysis reveals a substantial increase for all relevant fuel prices. Moreover, the beginning of the upward trend for fuel prices generally coincides with the increase in end-user electricity prices observed in section 3 above. Given that all three types of fuels represent an important cost driver for electricity, it seems likely that this development has also had an influence on electricity prices Wholesale prices Due to the varying speeds in the liberalisation process, including the establishment of organised wholesale markets, wholesale electricity prices are available to a different extent for individual countries. Overall, Figure 20 thus illustrates the development of wholesale prices in a total of 9 countries, although over different periods. For instance, while corresponding prices are available for the entire period in Norway and the UK, prices are available only for the last 3 4 years in other countries. In Norway and Sweden, there was a strong decrease in wholesale prices from 1996 to 2000, followed by a significant increase thereafter, and a slight reduction from 2003 to For the Nordic countries, this evolution is closely correlated with the hydrologic situation with high precipitation in and low precipitation in

32 This upward trend in recent years can also be observed in most other European countries, namely Denmark, Finland, France and Germany. In contrast, prices in the UK decreased only moderately between 1995 and 2000 before showing a steep fall until 2002, followed by a partial recovery in 2003/2004. Spain 20 represents a remarkable exception as it has experienced rising prices until 2002 but decreasing prices since. For most continental European countries, the general upward trend since 1999/2000 again coincides with the patterns observed for end user prices in chapter 3 above. Norway Sweden Finland Denmark Spain France Germany Netherlands UK = Figure 20: Nominal wholesale prices based on national power exchanges (2002=100) Note: Prices used are annual simple averages of day-ahead hourly prices. UK prices are based on the pool selling price (PSP) for the period and the Base load Price Assessment for day-ahead prices from the Heren Report for the period Unlike other organized markets that are based on voluntary power exchange, the Spanish market is based on a quasi-mandatory pool system. 27

33 4.4. General Observations In this section, end-user prices have been split into three categories of components, namely (i) network charges, (ii) taxes, levies and surcharges, and (iii) the residual costs, which can be considered as a proxy for the cost of energy. Besides showing the share of each of these three components in final end-user prices in 2004, 21 we have also carried out a closer analysis of the evolution of taxes over the entire period. Finally, we have undertaken an analysis of the development of wholesale electricity prices and selected fuel prices, in order to put the evolution of end-user electricity prices into perspective. Despite significant national differences, the findings allow the following general comments to be made: At the outset, it is important to note that levies and surcharges are not always directly allocated to consumers but are in some countries levied on electricity producers, suppliers and/or network or system operators. Whilst these additional costs clearly have to be passed on to consumers, it is not easy to determine the impact on different customer groups. As a result, the costs of energy and/or network charges shown above are likely to be over-estimated in a number of countries as they include further costs arising from governmental decisions. The composition of end-user prices shows significant differences between households and industrial consumers. Whilst the shares of network charges and the residual component (incl. energy) are roughly comparable for households, the share of the residual component is approx. three times larger than that of network charges in the case of industrial consumers. This obviously reflects inter alia the differences in load duration and the connection point (i.e. low voltage vs. medium-/high-voltage networks). Similarly, the share of taxes, levies and surcharges clearly varies between these two customer groups. Depending on the selection of countries (i.e. the EU-15 or those countries considered in section 4.2), the relative size of this component is about 2 3 times higher for households than for industrial customers. Whilst this can be partially explained by the different treatment of VAT in this analysis, the individual data in the appendix also clearly shows that many taxes or surcharges are primarily levied on smaller consumers, such as households. 21 Or, where 2004 was not available, for the year

34 In most countries, the proportion of these governmentally-imposed costs has grown significantly over the past decade. As a result, the average share of this price component (for the EU-15) increased from approx. 4% to almost 12% for industrial consumers between 1995 and 2004, and from 18.5% to nearly 24% for households. Whilst the relative size of this component thus nearly tripled for industrial consumers, the corresponding burden on households also grew by almost 30%. These figures indicate that governments have at least partially caused price increases in recent years or, alternatively, have prevented/limited price reductions that would otherwise been possible. These different observations are based on the consideration of aggregated figures, which are based on an average for selected groups of countries. An analysis of the detailed components per country as presented in section 6.2 (Appendix 2) furthermore reveals substantial differences between individual countries. Besides the impact of taxes, levies and surcharges, this observation also applies to the relation between network charges and the costs of energy (i.e. the residual costs). These variations indicate inter alia differences in the definition and allocation of costs, tariff structures and taxation policies. These national variations should be taken into account when comparing the findings described above with the actual development within any particular country. The analysis performed in this study reveals a substantial increase in several relevant fuel prices, including gas, oil and hard coal. Similarly, there is a clear upward trend in wholesale electricity prices in most continental European countries. It is interesting to note that the beginning of the upward trend for fuel prices and wholesale electricity prices generally coincides with the increase in end-user electricity prices observed in section 3 above. 29

35 5. Final Remarks and Observations This report has analysed the evolution of electricity prices for industrial and domestic consumers since the beginning of liberalisation. In addition to analysing the development of end-user prices since 1995, we have determined three major price components namely (i) taxes, levies and other surcharges; (ii) network charges; and (iii) a residual element comprising the cost of energy and compared their development. To the extent possible, this more detailed analysis has been performed for the past 5 years, i.e Finally, the evolution of selected cost-drivers (e.g. fuel prices) and wholesale electricity prices has been documented over the entire 10-year period. The analysis performed within this study has focussed on two customer groups based on the EUROSTAT indicators i.e. household customers with an annual consumption of 3,500 kwh, and industrial consumers with an annual consumption of 24 GWh. As confirmed by supplementary correlation analysis, these two groups appear to be representative for the entire supply of electricity to end-users within the EU. It is important to note that all results are based on publicly available figures, which have been reported by international or national institutions and companies. Below is a summary of the findings made within the individual chapters. In accordance with the general objectives of this study, we refer to aggregated numbers only, representing the entire EU or a sub-set of countries, without commenting on the development in individual countries. Overall, the main findings and observations can be summarised as follows: While for both industrial and households customers the cumulative change in electricity prices over the entire period and region is negligible in nominal terms, electricity prices have decreased by approximately 15% in real terms. At European level, both households and industrial customers thus paid considerably less for electricity in 2004 than 10 years ago when measured in 1995 prices. Nevertheless, the developments in individual countries show large variations, ranging from considerable price reductions in some countries to major price increases in others. The development of end-user prices clearly shows a different pattern for industrial as opposed to household customers. Whilst there were significant reductions for industrial customers at the beginning of the period, followed by a marked increase in recent years, nominal household prices have remained relatively stable. This observation can however not be applied to individual countries, which again show rather different trends and patterns. 30

36 Based on a more detailed analysis of individual price components, the composition of end-user prices shows significant differences between households and industrial consumers. For industrial consumers, the residual costs, which include the cost of energy, clearly represent the dominant component, amounting to more than 2/3 of the total price, whilst network charges account for less than a quarter of the total. Conversely, the respective shares of these two components are roughly equal in the case of domestic customers. Although the actual shares show considerable variation between different countries, this seems to reflect the difference in load duration and voltage level between households and industrial users. Similarly to the other components, the share of taxes, levies and surcharges varies between the two customer groups considered in this study. Depending on the selection of countries, the relative size of this component is about 2 3 times higher for households than for industrial customers. To some extent, this difference can be explained by the fact that household prices have been considered inclusive of VAT. However, even when correcting for this factor, the average amount of taxes, levies and surcharges was higher for domestic than for industrial customers. Apparently, various governments have decided to primarily levy corresponding taxes and surcharges on smaller consumers, such as households. Despite national differences, the share of costs arising from governmental decisions has generally grown significantly over the past decade. Between 1995 and 2004, the average share of governmentally-imposed direct costs in final end-user prices for industrial users in the EU-15 nearly tripled, from some 4% to almost 12%. At the same time, the corresponding share in domestic end-user prices has increased by almost 30%, from 18.5% to nearly 24%. On average, domestic and industrial customers were thus faced with considerably higher governmentally-imposed costs in 2004 than 10 years before. In many countries, governmental decisions have thus obviously either contributed to increasing prices and/or prevented potential or greater price reductions. Moreover, it is important to note that this development has had a higher relative impact on industrial users than on households. 31

37 In addition to the general increase in governmentally-imposed costs, it is important to note that certain levies and surcharges are sometimes levied on electricity producers, suppliers and/or network or system operators. In consequence, it is often impossible to clearly allocate these costs to individual consumers, such that they have not been considered as taxes, levies and surcharges in this study. Evidence from several countries therefore suggests that the actual costs of this component are higher than indicated by the numbers reported above. Conversely, the share of network charges and the residual costs (incl. energy) shown above are likely to be over-estimated in a number of countries as they include further costs arising from governmental decisions. Simultaneously, these cases also highlight certain differences in the definition and allocation of costs, tariff structures and taxation policies. These national variations should be taken into account when comparing the findings described in this chapter with the actual development within any particular country. Finally, it seems worth noting that the recent increase in end-user electricity prices generally coincides with an upward trend in major fuel prices and of wholesale electricity prices in the last years. Over the entire period under study, i.e. from 1995 to 2004, prices for gas, oil and hard coal rose by some 50% - 100% (in nominal terms). As shown in the first part of the analysis, and as pointed out above, this marked increase means that 2004 end-user prices for electricity had returned to 1995 levels in nominal terms. However, this corresponds to a 15% reduction in real terms. 32

38 6. Appendices 6.1. Appendix 1: Technical Notes Introduction The analysis of price developments faces a number of methodological obstacles and has to take into account numerous factors that influence electricity prices. This appendix therefore provides further details on the issues faced and the approach taken within this study. In detail, these technical notes discuss the following areas: Section discusses the choice and use of different sources of information considered for the purpose of this project. Section deals with the problems associated with customer definitions and availability of data, and the subsequent selection of customer groups. Section describes the approach for data treatment, with a view to minimising any problems associated with a comparison of prices from different countries and periods in time. Section briefly outlines the three groups of price components considered within this report Sources of Information This report is based on information collected on e.g. end-user prices, individual price components and potential cost drivers. To provide a well-documented and objective picture that can be checked by any third party, this report has made exclusive use of publicly available data. In addition, efforts have been made to ensure that all data used are as comprehensive and consistent as possible. Ideally, all information should therefore be based on a single source and the same assumptions and definitions. In practice, however, such a single source of information does not exist such that it has been necessary to rely on a variety of different sources. To strike a suitable balance between consistency, on the one hand, and accuracy and completeness, on the other hand, preference has generally been given to centralised data, i.e. information being available on a European or at least regional level. Such information is typically published by international organisations. Information sources used under this category include EUROSTAT (end-user prices for electricity and gas, or inflation), ERRA (electricity prices for accession countries), UCTE / NORDEL (physical data), EURELECTRIC (consumption, EURPROG publication). 33

39 Secondly, this study has made use of information that is published on a national scale, e.g. by the national statistical offices, governments, regulators or industry associations. On a national level, information has been collected on end-user prices, network charges, taxes, fuel and wholesale prices from various regulators (e.g. E- Control, CREG, STEM etc.), national statistical offices (e.g. Norway, Sweden), industry associations (e.g. VDEW, VDN) and power exchanges. Finally, this information has been supplemented by using average prices or tariffs as officially published e.g. by energy companies, regulators and/or industry associations in order to determine a reasonable estimate of the corresponding price information. In several countries, and typically for network charges, this study has either relied on average prices reported by national institutions or a separate calculation of the corresponding information based on official tariff information. Where possible, this information has been aggregated across several companies The complete list of centralised information sources is summarised in Appendix 3 (chapter 6.3), whilst all national data sources are listed in Appendix 2 (chapter 6.2) Selection of Customer Groups Ideally, this study should have considered all relevant end-user categories, or at least those that are most representative at both the national and EU level. In practice, however, the range of customer groups is limited by different customer definitions and, even more importantly, the lack of data for several years and/or customer groups. For instance, data from different countries rely on different definitions and may thus not be directly comparable. For the purpose of this report, this especially applies to the customer segmentation. For instance, extensive use of electric heating in Scandinavia implies that the typical annual consumption of e.g. a Swedish or Norwegian household is several times higher than that of a household in, say, France or Germany, which may again have a relatively high consumption compared to other Southern or Eastern European countries. Consequently, national statistics often use different customer definitions than other countries or international institutions like EUROSTAT. With regards to end-user prices, this issue can often be overcome by using EUROSTAT data, which are available for many countries. However, this effectively excludes other countries where only national data are available. Furthermore, EUROSTAT data is available for integrated end-user prices only, without any differentiation between e.g. network charges and the cost of energy. This later type of information is typically based on national definition and agreements and is available from national sources. More often than not, it is therefore impossible to derive reliable cost or price estimates that would fully be in line with the corresponding EUROSTAT customer categories. 34

40 In order to enable any comparison, this study is based on the following pragmatic approach: Wherever possible, we have used a combination of EUROSTAT data and equivalent data on relevant price components from national sources; Where information of price components was based on national customer categories, we have typically used national data also for end-user prices (i.e. for the same customer definitions), at least for the detailed analysis; Where national sources provided information on different price components only but not on end-user prices, we have sometimes combined this information with end-user prices from EUROSTAT for a comparable client category; Finally, where no or only incomplete EUROSTAT data was available, we have used national data also for end-user prices. Besides differences in customer segmentation, EUROSTAT data does not cover all customer categories, or at least not for the entire period of 5 respectively 10 years. This is especially the case for large and very large industrial users, which are often also not covered by national sources. For instance, whilst the largest consumer category covered by EUROSTAT (industrial users with an annual consumption of 70 GWh) can be considered large, it does not include very large and energy-intensive industrial users which often have a much higher consumption of several 100 GWh. Moreover, even for industrial users with an annual consumption of 70 GWh, EUROSTAT data are far from complete. At the same time, these customers are of particular importance since electricity often represents a significant share of their production costs. To nevertheless enable a meaningful comparison across the total of 24 countries, we have decided to limit our analysis to only two customer groups, namely one for households and one for (medium-sized) industrial customers. More precisely, we have used two of the reference consumers defined in the Council Directive 90/377/EEC of 29 June and the EU Benchmarking Reports. 22 Council Directive 90/377/EEC of 29 June 1990 concerning a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users and on a gentleman s agreement for households 35

41 As a result, this study considers the following customer groups: 23 Households with an annual consumption of 3,500 kwh (EUROSTAT cat. Dc) 24 connected to low-voltage networks; and Industrial consumers with an annual consumption of 24,000 MWh, a maximum demand of 4000kW and an annual utilisation of 6000 hours (EUROSTAT cat. Ig), connected to medium-voltage networks. While we clearly acknowledge that the resulting numbers have to be regarded with considerable caution, a simple analysis of the variations between different customer groups suggests that our choice may be less critical than one would expect: We have studied the development of end-user prices of the different industrial customers for those countries where sufficient data for different categories and the entire period were available ( ); the results are summarised in Table 1 and Table 2. Despite differences in the extent of increases or decreases, the results generally show a high degree of correlation. In several countries, the group of 24 GWh customers shows almost the same trend as the other categories. If one excludes small consumers with a consumption of 2 GWh, the same observation also applies to Belgium and Italy. 25 Table 1: Correlation between 24 GWh customer group and other industry categories 30 MWh 50 MWh 160 MWh 1250 MWh 2000 MWh MWh MWH MWH Average Belgium Italy Luxembourg Hungary UK Norway Similar observations also apply for the case of household customers. In particular, the trend in end-user prices for consumers with a consumption of 3,500 kwh appears representative for all household categories, including the Scandinavian countries. Overall, the limitation of our analysis to two customer categories, while certainly being not fully representative, therefore appears as a reasonable choice for the purpose of obtaining a good overview of price trends in a significant number of countries Please note that the demand characteristics given for each group are indicative. Depending on national practices respectively the (non-) availability of data, we have partially used slightly differing definitions. 3,500 kwh, among which 1300 kwh overnight (standard dwelling of 90m²) In Belgium, there is however a remarkable difference for the last year of the period (2004): Whilst prices decreased for consumers with an annual consumption of 24 GWh, the 70 GWh category faced a marked increase. 36

42 Table 2: Correlation between 3,500 kwh customer group and other Household categories 600 kwh 1200 KWh 7500 KWh KWh Average Denmark Hungary Finland Norway Treatment of Data Any comparison across a total of 24 countries is inevitably faced with differences in the legal, regulatory and business background. Moreover, when considering an extended period of time, one furthermore has to consider differences in economic development and inflation, as well as exchange rate fluctuations. For this purpose, we have taken a number of measurements aimed at providing a consistent and comparable basis for further analysis. In summary, we used the following measurements: Focus on main tariff elements: Some network companies split network charges into several tariffs for different services, such as for use of the system, metering services or the provision of reactive power. Some of these payments are based on rather specific criteria and complex pricing schemes but do only represent a minor share of total network charges. In order to limit the number of additional assumptions and to reduce the level of complexity, we have therefore generally considered network and, where applicable, system service charges, whilst we have neglected additional payments for e.g. metering services or reactive power compensation. Use of average prices: The structure of both end-user prices and network charges varies considerably across different countries and companies. Many utilities use a combination of multiple tariff elements, including e.g. standing charges, capacity and energy fees as well as a number of other elements. In addition, rates may also vary over time, i.e. between peak, off peak and night hours, or between winter and summer. To ensure that our analysis is based on a comparable price measurement which can be easily compared across countries, we have converted all prices into annual payments per kwh. Where necessary, we have relied on the demand characteristics of each customer group, supplemented by reasonable assumptions on the demand profile, in order to calculate first total annual payments and then the resulting average per kwh. 37

43 Use of regional averages: In many countries, end-user prices and/or network charges vary regionally, either due the use of locational tariffs and/or due to the existence of multiple network operators. As a result, it is not easily possible to define the national price or tariff in most countries. Whilst some countries already provide corresponding average figures on a national level, 26 other regulators and industry/consumer associations publish information on the tariffs and prices of individual companies. 27 In the latter case, we have calculated a (simple) average either across all companies or based on a sample of companies which we chose with a view of being representative for the different types of companies found in the corresponding country. Exchange rates: When comparing the development of prices in different countries it is important to consider the impact of exchange rates. As illustrated by Figure 21, exchange rates in Central Eastern Europe have shown considerable volatility over the past years. Whilst these fluctuations would need to be taken into consideration when comparing absolute price levels, we would like to emphasise again that the focus of this study is on the evolution of prices over time. For this reason, we have expressed all prices and price components in local currencies. This ensures that we document the price evolution actually experienced by customers in each country Czech Estonia Latvia Lithuania Hungary Poland Slovenia Slovakia UK Norway Figure 21: Average exchange rates to the EURO (1995=100) In the case of Sweden, we have instead used the median as this value is already reported by national authorities. For instance, both the tariff database published by the Austrian regulator E-Control and the Dutch Tariff Code provide data on the tariffs of individual companies. 38

44 Indexation: This report focuses on the (relative) evolution of prices over time. It is therefore not necessary, or even undesirable, to consider the absolute prices within different countries. Hence, whilst we quoted all prices and costs in national currencies when determining the different price components for each country, we used price indices for all cross-country comparisons. In practice, we set the index to 100 for the price level in the initial year of the period considered (e.g. 1995). The index for a given year can then be easily determined by dividing the price in that year by the price of the first year and multiplying the result by 100. This approach ensures a common basis for all countries and facilitates interpretation. Inflation nominal vs. real prices: During the 10-year period considered in our analysis, inflation resulted in a changing value of money over time. As e.g. illustrated by Figure 22, inflation in the EU-15 has caused an 18% increase of the general price level. In other words, a nominal price of 118 units in 2004 would be equivalent to a nominal price of 100 units in Conversely, the real value of a price of 100 units in 2004 was considerably lower 28 than the same nominal price in These considerations imply that it is important to consider the impact of inflation when comparing prices over an extended period of time. This is especially true when performing this analysis for a group of countries with significant differences in the development of the general price level, as was the case between e.g. most Western as opposed to some Central Eastern European countries between 1995 and For this purpose, we present electricity prices in both nominal and real terms, 29 using the inflation rates as published by EUROSTAT More precisely, by (1-100/118) or 15% This differentiation is sometimes also referred to as current costs and historic costs. 39

45 Inflation :+18% :+16% Inflation (%) = Countries considered: EU Figure 22: Inflation in the EU-15 ( ) Taxes / VAT: Taxes on goods and services clearly influence the costs of any product, including electricity. However, whilst industrial customers are usually able to regain the VAT paid on purchased goods, household consumers do not normally have this possibility. As a result, the effective costs for household customers are equivalent to the full cost of electricity inclusive of all taxes and VAT, VAT can be considered as irrelevant for business customers. Consequently, we have included all taxes (as defined by EUROSTAT) and VAT in our analysis of household electricity prices, whereas we have not considered VAT in the case of industrial consumers. Country weights: Due to the large number of countries considered in this study, it seems beneficial to also use an aggregated indicator in order to facilitate analysis of the main trends. The easiest solution clearly is to rely on a simple average as e.g. used in the EU benchmarking reports. This approach would however overestimate the influence of (very) small countries as it does not take into account the higher consumption in larger countries. 40

46 As an alternative, we have therefore decided in favour of a weighted indicator, which is similar to the one used by EUROSTAT. 30 In practice, we have used the national consumption of each country as a parameter for weighting prices and creating a weighted price for the entire EU. Based on consumption data for the year 2003, this resulted in the weights as shown in Figure 23. This illustration clearly shows the dominance of Germany, France, the UK, Italy and Spain, which already account for about 2/3 of total European electricity consumption. Naturally, this feature also implies that the price development within these countries will have a major impact on the EU-wide indicator, whereas any variations in many smaller countries will likely remain without any immediate influence. Italy 10.9% UK 13.6% Spain 7.6% Sweden 4.9% Poland 4.7% Norway 3.9% Netherlands 3.7% Belgium 2.9% Finland 2.9% Other 12.3% Hungary 1.3% Portugal 1.5% Greece 1.7% Austria 1.7% Denmark 1.2% Slovekia 0.9% Ireland 0.8% Slovenia 0.4% Lithuania 0.3% Luxembourg 0.2% Latvia 0.2% France 15.3% Germany 17.3% Estonia 0.2% Czech Republic 2.0% Figure 23: 2003 Share of national consumption This impact of different weights is illustrated below by a comparison of the results based on either simple or a weighted average. Figure 24 shows the evolution of electricity prices for industrial users (24 GWh) from 1995 to 2004 based on EUROSTAT data and the use of a simple average. Figure 25 provides the corresponding results for the case of a weighted average. 30 EUROSTAT publishes two aggregate EU indicators, which are available for households with a consumption of 3,500 kwh and industrial consumers with a consumption of 2,000 MWh only. Moreover, these indicators do not generally include Norway and the new member states, at least not for the period before

47 = Nominal Real terms Countries included (12): Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, UK Figure 24: Price evolution for industrial users using a simple average (24 GWh, ) Note: Prices excl. VAT = Nominal Real terms Countries included (12): Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, UK Figure 25: Price evolution for industrial users using a weighted average (24 GWh, ) Note: Prices excl. VAT Comparison of Figure 24 and Figure 25 reveals significant differences: Whilst the use of a simple average (at EU level) results in a price increase of 9% in nominal terms, the weighted average for a group of 12 countries shows a reduction by 0.2% in nominal terms. 31 Similarly, the results in 1995 prices vary between a decrease of 8% for the simple average and of 15% for the weighted average. These differences highlight the problems associated with the use of average figures. This observation implies that any results based on aggregated indicators, whilst being useful, need to be considered with particular caution. 31 Please note that we have only considered countries where data were available for the entire period (i.e. Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Spain, and UK and Norway; excluding Norway these countries represent respectively 87% of the EU 15 and 78% of the EU 25 in terms of total consumption). 42

48 Segregation into Price Components The guidance document stipulates that a detailed analysis of different price components shall be performed for the last 5 years. For this purpose, we have made our best efforts to split final end-user prices into three main categories of price components as illustrated by Figure 26. Determining and illustrating these price components and their evolution over time serves the main purpose of better understanding the real development of electricity as a market product. In fact, it is only one component (cost of energy) which is subject to liberalisation and competition, while the two others components are either regulated and/or directly set by legal or governmental action. Transmission, distribution Tax, levies & surcharges Network charges Other Regulated / administrated (no competition) Costs of energy Figure 26: Main components of end-user prices Energy Market-based prices (competition) In general, we have differentiated the following components: Network charges: This component includes all regular payments for connection to and use of the system, namely network charges, payments for system services, and metering charges. As discussed above, we have only taken into account the main tariff elements but neglected some specific payments, e.g. for the supply of reactive power. Similarly, we have not considered one-off payments, such as connection charges. 43

49 Taxes, levies and surcharges: Besides taxes and other official levies, this group also includes other surcharges that are imposed by governmental / regulatory decisions. Please note that this component is limited to those costs or charges that can be directly allocated to the end-use of electricity, such as purchase obligations for energy from renewables or CHP, stranded cost levies, surcharges for public service obligations, etc. It must be emphasised that these costs are not always explicitly invoiced to customers but are sometimes included in the network tariff or paid for by the generators/suppliers. Residual cost ( energy component ): This final category represents the residual share of the final end-user price that we have not allocated to either of the two other groups. Whilst we acknowledge that this component may include some regulated and/or administrated elements we believe that it represents a suitable proxy for the costs of electricity purchased in the wholesale market and supplied to end customers. 32 Similar to final end-user prices, we have determined the different price components separately for each country and for each category of consumers. However, it is important to note that the pace of liberalisation in Europe has been quite different. This also implies that, in some countries, network charges have only been made an explicit tariff element in recent years. Consequently, the time span for which we have been able to break down end-user prices into different components varies widely. As a general rule, we have considered detailed data from the time when network/useof-system charges were first published as a separate price component, but - with the exception of Italy and Norway - not for any years before 1999 or The differentiation of individual price components becomes even more important with regard to differences in the use of taxes, levies and other surcharges. Many countries have e.g. adopted specific national schemes to promote renewables or CHPs, to recover stranded costs, or to finance public service obligations. While all these schemes create additional costs, these are not always financed by taxes. In this respect, it is clearly necessary to provide further details on the already existing separation of taxes by EUROSTAT figures. Where we have been able to clearly allocate the costs of any levies or other surcharges to (individual) consumers, we have therefore included the corresponding costs into our analysis. Nevertheless, we acknowledge that there are a number of cases where it is not possible to derive any straightforward indicators, such that some of the related costs have sometimes remained in the residual price component, i.e. the energy component. 32 In several countries, there may be additional costs imposed on e.g. producers and/or on e.g. a lump sum basis suppliers. Whilst such elements clearly represent costs imposed by governmental/regulatory decisions, we have not considered them, unless there was a clear and transparent basis for allocating the corresponding cost to individual end-use customers. 44

50 6.2. Appendix 2: Country Data Austria Table 3: Summary of price components, assumptions and information sources for Austria Category Period Determination of average price Source End-user prices Households (3,500 kwh) Average given EUROSTAT, Unipede (1995) Households (3,500 kwh) Average given E-Control Industry (24 GWh) Average given E-Control Price components Taxes, levies and surcharges VAT Own calculations, EUROSTAT based on tax rates Electricity tax Average given E-Control Stranded costs surcharge Average given E-Control Gebrauchsabgabe Arithmetic average of E-Control / INRA (concession charge) Surcharge for renewable averages given Average given E-Control power CHP-surcharge Network charges Households (3,500 kwh) Arithmetic average of averages given E-Control 45

51 ct /kwh VAT Surcharge for renewable power and CHP Electricity tax Stranded costs surcharge "Gebrauchsabgabe" (concession charge) Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 27: Cost components for households in Austria ( ) 8 ct /kwh Stranded costs surcharge Electricity tax Surcharge for renewable power CHP-surcharge Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 28: Cost components for industrial consumers in Austria (24 GWh, ) 46

52 Belgium Table 4: Summary of price components, assumptions and information sources for Belgium End-user prices Category Period Determination of average price Households (3,500 kwh), industry (24 GWh) Source Average given EUROSTAT Price components VAT Own calculations, based on tax rates Taxes, levies and surcharges include the following Financing social measures Act 4 September 2002 OCMW s Financing measures for renewable sources Usage of the public domain Compensation net losses Tariff 'beschermde klanten' / protected customers Cost coverage of the Commission for the Regulation of Electricity and Gas (CREG) Financing of liabilities of denuclearisation of BP1 en BP2 at Mol-Dessel Financing federal policy for CO2 emission reduction Federal charge for municipalities Financing promotion Rational Energy Usage 2004 Own calculations, based on tax rates Own calculations, based on rates given Average given Network charges Households (3,500 kwh) 2004 Own calculations, based on rates given Meter rent 2004 Own calculations, based on rates given EUROSTAT Official documents Official documents/creg Official documents/creg CREG Official documents/creg 47

53 VAT Euro/MWh Taxes, levies & surcharges Meter rent Distribution Transmission Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 29: Cost components for households in Belgium ( ) 48

54 Czech Republic Table 5: Summary of price components, assumptions and information sources for the Czech Republic Category Period Determination of average price Source End-user prices Households (Average) EUROSTAT Average given Industry (24000 MWh) EUROSTAT Price components Taxes, levies and surcharges VAT Market operator Renewable and cogeneration Decentralised production Network charges Transmission System services Distribution Average given Average given Energy Regulatory office Energy Regulatory office 3000 VAT CZK/MWh Decentralised production Renewables and cogeneration Market operator System service Distribution 1000 Transmission Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 30: Cost components for households in the Czech Republic ( ) 49

55 CZK/MWh Distribution Transmission System services Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 31: Cost components for industrial consumers in the Czech Republic ( ) 50

56 Denmark Table 6: Summary of price components, assumptions and information sources for Denmark Category Period Determination of average price Source End-user prices Households (3,500 kwh) EUROSTAT Industry (10 GWh) EUROSTAT Industry (2 GWh) Average given EUROSTAT Households (4,000 kwh) Dansk Energi Industry (10 GWh) Dansk Energi Price components (Household 3,500 kwh and industry 10 GWh) Taxes, levies and surcharges VAT Normal electricity tax Electricity distribution tax Annual subscriptions obligation to supply company Dansk Energi CO 2 tax Average given Electricity saving contribution Priority Electricity Public service obligation (PSO) Network charges Annual subscriptions network company Average given Dansk Energi Local network Regional & national network 51

57 CDK/kWh VAT Normal electricity tax CO2 tax Electricity distribution tax Electricity saving contribution PSO Priority Electricity Annual subscriptions network company Local network tariffs Regional and national network tariffs Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 32: Cost components for households in Denmark ( ) CDK/kWh CO2 tax Annual subscriptions obligation to supply company Electricity distribution tax PSO Priority Electricity Annual subscriptions network company Local network tariffs Regional and national network tariffs Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 33: Cost components for industrial consumers in Denmark ( ) 52

58 Estonia Table 7: Summary of price components, assumptions and information sources for Estonia Category Period Determination of average price Source End-user prices Households (Average) Average given EUROSTAT Price components Taxes, levies and surcharges VAT Average given Eesti Energeetika Network charges Distribution Average given Eesti Energeetika ceek/kwh VAT Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 34: Cost components for households in Estonia ( ) 53

59 Finland Table 8: Summary of price components, assumptions and information sources for Finland Category Period Determination of average price Source End-user prices Households (3,500 kwh), EUROSTAT industry (24 GWh) Households (5,000 kwh) Average given Finnish Energy Market Authority (EMA) Industry (10 GWh) EMA Price components Taxes, levies and surcharges VAT Own calculations, EUROSTAT based on tax rates Electricity tax Average given EMA Network charges Households (5,000 kwh) Industry (10 GWh) Average given EMA 12 ct /kwh VAT Electricity tax Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 35: Cost components for households in Finland ( ) 54

60 6 5 ct /kwh Electricity tax Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 36: Cost components for industrial consumers in Finland ( ) 55

61 France Table 9: Summary of price components, assumptions and information sources for France Category Period Determination of average price Source End-user prices Industry (24 GWh) Average given EUROSTAT Price components Taxes, levies and surcharges Contribution aux charges de Service Public de l'electricité - CSPE Network charges Industry (24 GWh, 4000 kw, network level HTA / 1 50 kv) Own calculations, based on tax rates Official documents Average given RTE/ CRE (calculator) 70 Euro/MWh CSPE Network charges Residual Cost (incl. energy) Energy + transport All in one price (integrated) End-user price Figure 37: Cost components for industrial consumers in France ( ) 56

62 Germany Table 10: Summary of price components, assumptions and information sources for Germany Category Period Determination of average price Source End-user prices Households (3,500 kwh), EUROSTAT industry (24 GWh) Average given Households (3,500 kwh) VDEW Industry (24 GWh) VDEW Price components Taxes, levies and surcharges VAT Own calculations, EUROSTAT based on tax rates Ecotax Own calculations, Official documents based on tax rates Concession levy households Average given VDEW Concession levy industry Max. permitted Official documents charge Surcharges for purchase Own calculations, VDN obligations from renewables (EEG) based on rates given Surcharges for purchase Own calculations, VDN obligations from CHP (KWK) based on rates given Network charges Households (3,500 kwh) Average given VDEW Industry (medium voltage) Arithmetic average of averages given VDN 57

63 ct/kwh VAT Ecotax Concession levy Renewables levy CHP-surcharge Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 38: Cost components for households in Germany ( ) 10 ct/kwh Ecotax Concession levy Renewables levy CHP-surcharge Network charges Residual Cost (incl. energy) All-in-one price (integrated) End-user price Figure 39: Cost components for industrial consumers in Germany ( ) 58

64 Greece Table 11: Summary of price components, assumptions and information sources for Greece Category Period Determination of average price Source End-user prices Industry (24GWh) Average given EUROSTAT Price components Taxes, levies and surcharges Regulator Renewables (including Nation-wide uniform fee for Renewable Energy System units and Fee for recovering Transmission Use of System charges by renewable generators) Administrative Expenses of the Hellenic Transmission System Operator (HTSO) Network charges Transmission Constrained Operation Ancillary Services Distribution network Average given Own calculation based on only on the transmission cost Own calculation based on official tariff Regulatory Authority of Energy/ Hellenic Transmission System Operator Regulatory Authority of Energy/ Hellenic Transmission System Operator Note In Greece network access charges are estimated on an annual basis and are paid by generators (30%) and customers (70%). An estimation of network charges is made ex-ante and at the end of each year any deviations are rectified. The principles for the allocation of the network charge on customers are complex and depend on various factors. For instance, the participation of the customer s peak demand and the system s peak or whether the existing metering equipment (hourly or not) has an influence on the network access charges. In addition there are also additional fees for ancillary services and other levies that are applied in proportion of consumption. According to an estimation made by the Regulatory Authority for Energy (RAE), for the year 2002, the average transmission tariff for the average network user in order to access the high voltage system was 4.4 /MWh. The suppliers have to reimburse the TSO for their customers use of the system. The component charges for access to the system and the network are part of the tariffs as well as the additional fixed charges and are not shown distinctly within the retail tariff. For the time being, the only separated charge in the tariffs is a nation wide uniform levy for the absorption by the TSO of renewable energy. This charge came into force in (0.60 /MWh) and increased to 0.80 /MWh in

65 6 Renewables c /kwh Administrative Expenses of HTSO Regulator Constrained Operation Ancillary Services Distribution Transmission Residual Cost (incl. energy) All in one price (integrated) End user price Figure 40: Cost components for industrial consumers in Greece ( ) 60

66 Hungary Table 12: Summary of price components, assumptions and information sources for Hungary Category Period Determination of average price Source End-user prices Households (Average) Hungarian utilities Average given Industry (24 GWh) EUROSTAT Price components Taxes, levies and surcharges VAT Stranded costs Energy tax Renewable & cogen support Network charges System operation & ancillary service Transmission Distribution Average given Average given Hungarian Energy Office Hungarian Energy Office 61

67 35 30 Ft/kWh VAT Stranded costs Renewable & cogen support Distribution System operation & ancillary service Transmission Residual Cost (incl. energy) All in one Price (integrated) End-user price Figure 41: Cost components for households in Hungary ( ) 16 Ft/kWh Energy tax Renewable & cogen support Stranded costs Distribution System operation & ancillary service Transmission Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 42: Cost components for industrial consumers in Hungary ( ) 62

68 Ireland Table 13: Summary of price components, assumptions and information sources for Ireland Category Period Determination of average price Source End-user prices Households (3,500 kwh), industry (24 GWh) Price components Taxes, levies and surcharges VAT PSO levy Network charges Transmission Distribution Average given EUROSTAT Own calculations, based on rates given Own calculations, based on rates given Electricity Supply Board (ESB)/Commission for Energy Regulation (CER) ESB/CER c/kwh VAT PSO Levy Distribution Transmission Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 43: Cost components for households in Ireland ( ) 63

69 8 7 c/kwh PSO levy Distribution Transmission Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 44: Cost components for industrial consumers in Ireland ( ) 64

70 Italy Table 14: Summary of price components, assumptions and information sources for Italy End-user prices Category Period Determination of average price Households (3,500 kwh), industry (24 GWh) Price components VAT States taxes Taxes, levies and surcharges include the following Renewables, CHP Stranded cost levy (c/kwh) Nuclear decommissioning (c/kwh) Cost of GRTN Source Average given EUROSTAT Own calculations, based on tax rates Network charges Industry Own calculations, based on tax rates EUROSTAT Autorita Energia/Enel Autorita Energia/Enel Note Until 2001 the tariff was simply made up of the energy price, a fixed component (power charge), a generation surcharge passed through to partially fund fossil-fuelled plants plus transmission surcharges that also included equalisation components and environmental/stranded asset charges, plus VAT. Therefore the separation between the different components is only indicative as made by Enel. After 2001 prices have been unbundled into generation, transmission, distribution/retail, system charges (e.g. stranded costs, levies, local tax imposition etc.), and special levy such as CO2. Please note that all end-user prices are based on the tariffs of the franchise suppliers and do not include the prices of contracts concluded on a bilateral basis. 65

71 Euro/MWh VAT Taxes, levies & surcharges States taxes Network charges Residual Cost (incl. energy) End-user price Figure 45: Cost components for household in Italy ( , captive customers) Euro/MWh Taxes, levies & surcharges States taxes Network charges Residual Cost (incl. energy) End-user price Figure 46: Cost components for industrial consumers in Italy ( ) 66

72 Latvia Table 15: Summary of price components, assumptions and information sources for Latvia End-user prices Category Period Determination of average price Households (3,500 kwh), industry (24 GWh) Own calculations, based on rates given Price components Taxes, levies and surcharges VAT Own calculations, based on tax rates Surcharges for purchase obligations from renewables and CHP (feed-in scheme) Own calculations, based on total payments and national consumption Network charges Households (3,500 kwh) Own calculations, based on rates given Industry (medium voltage) Own calculations, based on rates given Source Official tariffs EUROSTAT Latvenergo Official tariffs Official tariffs 67

73 VAT 0.04 Feed-in Scheme LVL/kWh Network charges Residual Cost (incl. energy) All in one price (integrated) 0.01 End-user price Figure 47: Cost components for households in Latvia ( ) LVL/kWh Feed-in Scheme Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 48: Cost components for industrial consumers in Latvia ( ) 68

74 Lithuania Table 16: Summary of price components, assumptions and information sources for Lithuania Category Period Determination of average price Source End-user prices Industry (24GWh) EUROSTAT Network charges Distribution Own calculation based on official tariff Official documents cltl/kwh Network charges Residual Cost (incl. energy) End-user price Figure 49: Cost components for industrial consumers in Lithuania ( ) 69

75 Luxembourg Table 17: Summary of price components, assumptions and information sources for. End-user prices Category Period Determination of average price Households (3,500 kwh), industry (24 GWh) Luxembourg Source Average given EUROSTAT Price components Taxes, levies and surcharges VAT Own calculations, based on tax rates Compensation fund (a) Average given (consumers < 65 kv only ) Costs of regulator Average given Consumption taxes Average given Network charges Households (3,500 kwh) Arithmetic average of averages given Industry (medium voltage) Arithmetic average of averages given (a) Support for renewables and small CHP EUROSTAT Institut Luxembourgeois de Régulation (ILR) ILR ILR VAT /MWh Regulator Compensation fund Consumption taxes Network charges Residual Cost (incl. energy) Energy + transport All in one Price (integrated) End-user price Figure 50: Cost components for households in Luxembourg ( ) 70

76 60 50 /MWh Consumption taxes Network charges Residual Cost (incl. energy) All in one Price (integrated) End-user price Figure 51: Cost components for industrial consumers in Luxembourg ( ) 71

77 The Netherlands Table 18: Summary of price components, assumptions and information sources for The Netherlands Category Period Determination of average price Source End-user prices Households (3,500 kwh) Average given EUROSTAT Price components VAT Own calculations, based on tax rates Taxes, levies and surcharges include the following Regulating Energy Tax (EcoTax) Own calculations, based on tax rates EUROSTAT Official documents/dte Milieukwaliteit Elektriciteitsproductie (MEP) Reimbursement Energy Tax Arithmetic average of averages given Arithmetic average of averages given Meter rent Arithmetic average of averages given Network charges Households (3,500 kwh) Arithmetic average of averages given Official documents/dte Official documents/dte Official documents/distribution companies Official documents/dte 72

78 25 ct /kwh VAT Taxes, levies & surcharges Meter rent Network charges Residual Cost (incl. energy) All in one Price (integrated) End-user price Figure 52: Cost components for households in the Netherlands ( ) 73

79 Norway Table 19: Summary of price components, assumptions and information sources for Norway Category Period Determination of average price Source End-user prices Households (3,500 kwh) Average given EUROSTAT Industry (2 & 10 GWh) Average given EUROSTAT Industry (24 GWh) Average given Statistics Norway Price components Taxes, levies and surcharges VAT Own calculations, EUROSTAT based on tax rates Energy consumption fee Official tax rate Statistics Norway Network charges Households (4,000 kwh) Average given NVE Industry (4 GWh, level 3) (a) Simple average, NVE calculated from tariff components for individual companies (a) No data for 2002; calculations based on average oere/kwh VAT Energy consumption fee Network charges Residual Cost (incl. energy) All-in-one-price (integrated) End-user price Figure 53: Cost components for households in Norway ( ) 74

80 oere/kwh Consumption fee Network charges Residual Cost (incl. energy) All-in-one-price (integrated) End-user price Figure 54: Cost components for industrial consumers in Norway (4 GWh, ) 75

81 Poland Table 20: Summary of price components, assumptions and information sources for Poland End-user prices Category Period Determination of average price Standard household tariff (supplied from urban LV networks) Industry connected to HV network with consumption >24GWh, demand >4MW Price components Taxes, levies and surcharges VAT Local taxes Network charges Households Industry Average given Own calculations, based on tax rates Average given Own calculation based on only on the transmission cost Average given Source Energy Market Agency Energy Market Agency Energy Market Agency Note In Poland, the CHP and RES component is included in the end user price. However these two components are not direct levies since they are not imposed directly on final customers. They represent additional costs for distribution companies who then allocate this to final customers. However the exact allocation of this component onto the consumer is not publicly available, therefore these components are not presented. 76

82 PLZ/MWh h VAT Local taxes Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 55: Cost components for households in Poland ( ) PLZ/MWh h Local taxes Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 56: Cost components for industrial consumer in Poland ( ) 77

83 Portugal Table 21: Summary of price components, assumptions and information sources for Portugal Category Period Determination of average price Source End-user prices Average consumers Average given EUROSTAT Price components Energy ( single buyer ) Energy ( others ) Commercialisation Margin Commercialisation of wires Commercialisation (SEP) Network charges Global use of System Charge Transmission Distribution Average given Energy Services Regulatory Authority Note In Portugal, additional obligations to suppliers are included through cost of general interest. In Portugal, clients at regulated tariffs have embedded in their prices additional charges related to the promotion of renewables energy sources/ cogeneration, concession fees that the distributor has to pay to the municipalities for LV network, and the subsidization of the Portuguese insular regions by the Portuguese mainland electricity clients. This amount corresponds in 2004 to 7,7% of the average total price, i.e. 7,93 /MWh. 78

84 120 Euro/MWh Commercialisation of wires Commercialisation (SEP) Distribution Commercialisation Margin Global use of System Charge Transmission Energy ("others") Energy ("single buyer") End user price Figure 57: Cost components for average users in Portugal ( ) 79

85 Slovakia Table 22: Summary of price components, assumptions and information sources for Slovakia End-user prices Category Period Determination of average price LV small consumers - household - up to 1 KV (total) EHV large consumers over 52 KV (total) Source Average given Regulatory Office for Network Industries Average given Regulatory Office for Network Industries Price components Taxes, levies and surcharges VAT Own calculations, EUROSTAT based on tax rates Network charges Households Average given Regulatory Office for Network Industries Industry Average given Regulatory Office for Network Industries Note Up to the end of 2002, the Slovakian electricity industry was vertically integrated. The Slovakian regulatory authority has regulated network charges since Therefore a breakdown of prices before 2003 is not available. In Slovakia no specific taxes exist besides VAT. 80

86 SKK/MWh VAT Network charges Residual costs (incl. Energy) End user price Figure 58: Cost components average households in Slovakia ( ) SKK/MWh Network charges Residual costs (incl. Energy) End user price Figure 59: Cost components for average industrial users in Slovakia ( ) 81

87 Slovenia Table 23: Summary of price components, assumptions and information sources for Slovenia Category Period Determination of average price Source End-user prices Average Households Average given Energy Agency Price components Taxes, levies and surcharges VAT Own calculations, based on tax rates Contribution for Energy Arithmetic average of Agency averages given Priority dispatching Arithmetic average of averages given Ancillary services Contribution for Market operator Arithmetic average of averages given EUROSTAT Energy Agency Energy Agency Energy Agency Network charges Average Households Average given Energy Agency 12 /kwh VAT Market operator Priority dispatching Energy Agency Ancillary services Network charges Residual Cost (incl. energy) All in one Price (integrated) End-user price Figure 60: Cost components for average households in Slovenia ( ) 82

88 Spain Table 24: Summary of price components, assumptions and information sources for Spain Category Period Determination of average price Source End-user prices Average consumers Unesa Households Average given EUROSTAT Industrial EUROSTAT Price components (Average customer) Energy Capacity Payment Ancillary Services Renewables CHP Permanent Costs Stranded Costs Transmission Distribution Nuclear Moratorium & decommissioning Others Price components (Households) Electricity tax VAT Price components (Industrial) Average given Unesa Unesa/EUROSTAT Electricity tax Unesa/EUROSTAT Transport Note The official Spanish tariff published in the Spanish Gazette does not show the breakdown of the different cost components for each category of customer (i.e. industrial and households). For instance any customer in Spain has the option to choose a regulated tariff or a non-regulated tariff, however, the respective information on distribution and transmission is not publicly available. Therefore, the only detailed breakdown of the tariff components officially available is for the average referential tariff, which details the cost components for the whole system. We therefore present the detailed breakdown only for the average referential tariff. 83

89 /MWh Others Renewables CHP Permanent Costs Capacity Payment Nuclear Moratorium & decommissioning Stranded Costs Ancillary Services Distribution Transmission Energy End user price Figure 61: Cost components for average users in Spain ( ) /MWh VAT Electricity Tax "Energy" all taxes included Figure 62: Cost components for average households in Spain ( ) 84

90 /MWh Electricity Tax Residual Cost (incl. energy) End-user price Figure 63: Cost components for average industrial consumers in Spain ( ) 85

91 Sweden Table 25: Summary of price components, assumptions and information sources for Sweden Category Period Determination of average price Source End-user prices Households (3,500 kwh), Average given EUROSTAT industry (24 GWh) Households (5000 kwh) Average given Statistics Sweden Industry (2, 10 GWh) Average given Statistics Sweden Price components Taxes, levies and surcharges VAT Own calculations, EUROSTAT based on tax rates Specific taxes on fuel and Average given Svensk Energi energy/power Network charges Households (5000 kwh) Average given Swedish Energy Authority (STEM) Industry (5 GWh) Average given Swedish Energy Authority (STEM) 86

92 VAT 120 CSEK/kWh Specific taxes on fuel and energy/power Network charges Residual Cost (incl. energy) All-in-one price (integrated) 0 End-user price Figure 64: Cost components for households in Sweden ( ) CSEK/kWh Network charges Residual Cost (incl. energy) End-user price Figure 65: Cost components for industrial consumers in Sweden (2-10 GWh, ) 87

93 The United Kingdom Table 26: Summary of price components, assumptions and information sources for the United Kingdom End-user prices Category Period Determination of average price Households (3,500 kwh), industry (24 GWh) Price components Taxes, levies and surcharges VAT Source Average given EUROSTAT Energy efficiency commitment Fossil Fuel Levy Green Certificates Climate Change Levy Network charges Households Industry Metering and data collection Own calculations, based on tax rates Own calculations, based on tax rates Own calculations, based on official documents EUROSTAT OFGEM/DTi OFGEM/DTi 88

94 9 8 VAT p/kwh Fossil Fuel Levy Green Certificates Energy Efficiency Commitment Distribution Transmission Metering and Data Collection Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 66: Cost components for households in the United Kingdom ( ) p/kwh Green Certificates Climate Change Levy Fossil Fuel Levy Network charges Residual Cost (incl. energy) All in one price (integrated) End-user price Figure 67: Cost components for industrial consumers in the United Kingdom ( ) 89

95 6.3. Appendix 3: General Sources of Information For this study, we have made use of the following centralised information sources, over and above those mentioned for individual countries: ERRA Energy Regulators Regional Association, ETSO Energy Transmission System Operators, EURELECTRIC Union of the Electricity Industry, EUROSTAT Statistical Office of the European Communities, IEA International Energy Agency, NORDEL Organisasion for Nordisk Elsamarbeid, UCTE Union for the Co-ordination of Transmission of Electricity, 90