European energy price development

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1 Household Energy Price Index for Europe October 28th 2013 October Prices Just Released The most up-to-date picture of European household electricity and gas prices: VaasaETT and two leading European energy market authorities collaborate to track monthly energy prices in 23 European countries European energy price development Electricity and gas prices, including distribution but excluding taxes, in the capital cities of the EU-15 keep on evolving in an asymmetrical trend. The index for electricity keeps on increasing, reaching almost 116 points this month (up one index point from last month). On the contrary, the index for gas is still on a decreasing trend which started in February: slightly down compared to last month and down 4% since the beginning of the year. (Figure 1.) Similar conclusions can be drawn from looking at the HEPI indexes covering the 22 EU countries which are part of our price survey 1. (Figure 2.) In This Month s Edition HEPI price trend Electricity prices keep increasing while gas prices continue on the opposite trend Shocking differences in energy prices paid by European households Eastern and Southern European countries have highest prices for energy when measured at PPS Energy Price breakdown Market forces represent less than half of the electricity bill. Residential electricity prices Figure 3 shows the end-user price of electricity in 23 European capital cities as of October It shows that depending on where a customer lives in the EU, 1 Serbia is not yet a member of the EU and as such Belgrade is not yet included in the Index. 1

2 the price that customer has to pay per kwh of electricity can vary by as much as 134%. If we include Belgrade, the price varies by a staggering ratio of 4.9. Household customers in Copenhagen and (since January this year) Berlin pay by far the highest prices in Europe (though the price of energy represents of small portion of the total price, the lion s share being taxes, in fact), while inhabitants of Belgrade pay the least. The most significant changes which occurred this month are: Remarkable price decreases in Zagreb (-6% in national currency) and in Vienna (-2%); Price increases in Madrid and Stockholm (+3%) and in Copenhagen and Dublin (+2%); Other more modest changes also occurred but none greater than 1%. When adjusted to purchasing power in each country however, most CEE countries end up with prices which are above the European average. (Figure 4.) Berlin overtakes Copenhagen as the place with the most expensive electricity followed by Prague and Lisbon. On the other end of the spectrum, Helsinki has the cheapest electricity at PPS 2 followed by Belgrade and Paris. Residential gas prices Figure 5 shows the end-user price of natural gas in 22 European capital cities as of October The highest price by very far is paid by inhabitants of Stockholm (close to twice as much as the second most expensive city for gas). This can be explained by the small size the market; there are only 33,000 household gas customers in the whole of Sweden 4. Not accounting for Stockholm, Copenhagen becomes the most expensive city for gas where prices are 3.6 times as high as in Bucharest, the cheapest city for gas. The most significant changes which occurred this month are: 2 PPS is an artificial common reference currency unit that eliminates price level differences between countries. One PPS thus buys the same given volume of goods and services in all countries. It is developed by Eurostat to accurately compare prices across Europe. 3 Please note that Helsinki has been left out of this analysis on gas prices. Indeed, there is virtually no residential gas market in Finland. 4 The Swedish electricity and natural gas markets 2011 (2012: 61). 2

3 A 4% price decrease in Luxembourg, a 2% price decrease in Rome and in Vienna; A 3% price increase in Ljubljana. Prices at PPS (and ignoring Stockholm) offer a very different outcome. Lisbon has the highest adjusted prices followed by Belgrade, Rome, Warsaw and Prague, while Luxembourg, London and Brussels have Europe s lowest adjusted prices for gas. (Figure 6.) Energy price breakdown The breakdown of end-user energy prices into four components (energy, distribution, energy taxes and VAT) also shows major variations. (See Figures 7 and 8.) Our survey shows that on average, the energy price component (including retail margins) represents about 41% of the end-user price of electricity, distribution 33%, energy taxes 11% and VAT 16%, while energy (including retail margins) represents 54% of the end-user price of natural gas, distribution 23%, energy taxes 7% and VAT 16%. Copenhagen is a very unusual case; the cost of energy as a commodity represents less than a fifth of the end-user electricity price, by far the lowest of all surveyed cities, whereas the energy taxes represent an astonishing 36% (over three times Europe s average) and 56% if we include VAT. A similar (albeit to a lesser extend) case is Berlin where since the introduction of the Energiewende, the energy tax component represents 28% of the end-user price of electricity. Overall, the results show that market forces represent only about half of the enduser price (both for electricity and gas) whereas national fiscal and regulatory elements are responsible for the other half through distribution tariffs, energy taxes and VAT. 3

4 Figure 1. Evolution of residential energy and distribution prices excluding taxes in the EU-15 Figure 2. Evolution of residential energy and distribution prices excluding taxes in the EU-22 4

5 Figure 3. Residential electricity prices including taxes (October 2013) Figure 4. Residential electricity prices including taxes at PPS (October 2013) 5

6 Figure 5. Residential gas prices including taxes (October 2013) Figure 6. Residential gas prices including taxes at PPS (October 2013) 6

7 Figure 7. Residential electricity price breakdown (October 2013) Figure 8. Residential gas price breakdown (October 2013) Visit our project webpage at and subscribe to the free monthly update of the HEPI index for Europe. 7

8 For More Information Christophe Dromacque HEPI Project Manager Office: +358 (0) Mobile: +358 (0) (English / French) Anna Bogacka Analyst Office: +358 (0) Mobile: +358 (0) [email protected] (English / Russian) Silke Ebnet Regulation and Competition Office: +43 (1) [email protected] (English / German) László Szabó Head of Unit Department of Market Monitoring [email protected] (English / Hungarian) 8

9 About the Authors Energie-Control Austria Energie-Control Austria was set up by the legislator on the basis of the new Energy Liberalisation Act and commenced operation on 1 March Energie-Control is headed by Mr. Walter Boltz and Mr. Martin Graf as managing directors and is entrusted with monitoring, supporting and, where necessary, regulating the implementation of the liberalisation of the Austrian electricity and natural gas markets. More at: The Hungarian Energy and Public Utility Regulatory Authority The main responsibilities of the Hungarian Energy and Public Utility Regulatory Authority are consumer protection, providing regulated access to networks and systems, carrying out regulatory competencies in order to maintain security of supply and fostering competition. The scope of the infrastructures, which have to be overseen by the Hungarian Energy and Public Utility Regulatory Authority has been extended in 2011 with the complete regulation of district heating and in 2012 with the water public utilities. As market progresses are becoming more widespread, we put emphasis on our market monitoring task and we pay specific attention to regional market integration both in electricity and natural gas. More at: VaasaETT Global Energy Think Tank VaasaETT is a unique and world leading collaborative think-tank and consultancy that delivers best practice, data, analysis and highly specialised expertise from around the world to the global energy and utilities industry. We help turn the World s best knowledge into local strategies and solutions. At the heart of our offering is a global knowledge sharing network of thousands of contacts in over 60 countries in six continents and a vast up-to-date and ever increasing store of global best practice, data and analyses. Our world-leading expertise include: customer behaviour and psychology, customer lifetime value, smart energy issues and market efficiency issues. VaasaETT is the world s leading source of benchmark information on customer switching trends and dynamics; retail energy prices; and, smart grid, smart energy demand and demand response programs. VaasaETT is also a founding member and manager of the European Smart Energy Demand Coalition (SEDC); the World s only organization that has tracked customer behavior data in every competitive electricity market globally since market opening, and a source of market tracking data in over 60 jurisdictions in six continents. VaasaETT delivers assistance to clients and its network through consulting, collaboration and its new energydatastore.com service. More at: 9

10 Sources AERS (Energy agency of the Republic of Serbia),ANRE (Autoritatea Nationala de Reglementare in Domeniul Energiei, Romania), Autorità per l'energia elettrica e il gas (Italy), BDEW (Germany), BnetzA (Germany), BRUGEL (Brussels), CEER, CNE (Spain), Commission for Energy Regulation (Ireland), CRE (France), Dansk Energi (Denmark), DECC (Great Britain), Energiamarkkinavirasto (Finnish Energy Market Authority), Energie-Control Austria, Energie-info (France), Energiezaak (Netherlands), Energy Customers (Ireland), Entidade Reguladora dos Serviços Energéticos (Portugal), Eurostat, Institut Luxembourgeois de Regulation (Luxembourg), ERO Javna agencija Republike Slovenije za energijo (Slovenia), ERU (Energetický regulační úřad, Czech Republic), OFGEM (Great Britain), MEKH (Hungarian Energy and public Utility Autoroty), RAE (Greece), Statistics Norway, Statistics Sweden (SCB), The Energy Markets Inspectorate (Sweden), URE(Energy Regulatory Office, Poland), URSO (Úrad pre reguláciu sieťových odvetví, Slovakia) 10