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German utilities blasted over power prices

disclaimer: image is for illustration purposes only
by Staff Writers
Berlin (UPI) Aug 10, 2010
German utilities have to defend themselves against allegations that they overcharged electricity consumers by some $1.3 billion.

Energy giant RWE from Dusseldorf on Aug. 1 raised electricity prices for private consumers by nearly 8 percent, affecting around 2 million customers.

A study paid for by the German Green Party indicates that the prices for RWE power should actually have fallen and that several utilities have overcharged their customers in times of plummeting wholesale electricity prices.

All in all, the utilities active in Germany in 2009 overcharged customers by up to $1.3 billion, the study's author Gunnar Harms claims.

RWE has denied the allegations, arguing that it had to raise prices due to the feed-in-tariff for renewables and because it buys power three years in advance, in a bid to be less affected by the volatile wholesale market.

Politicians, however, aren't convinced.

Hans-Michael Goldmann, a member of the government Free Democrats and the head of the parliament's consumer protection committee, criticized what he says looks like a lack of transparency in RWE's pricing activities. He added his committee would tackle the growing German electricity prices when it returns from recess next month.

"If the utilities have done something that's not right and used monopolistic structures in the process then there has to be a refund for our citizens," he told the Hannoversche Allgemeine Zeitung newspaper. "There is no tough competition on the (German) electricity market."

Oskar Lafontaine, of the opposition Left Party, said electricity price hikes should be subject to state approval.

"The neo-liberal deregulation of the energy market has led to an explosion of power prices," he said. "If within five years profits triple and electricity prices grow by more than 50 percent, then the government has to interfere."

The German power market for years has been dominated by four big utilities -- apart from RWE also Eon, EnBW and Vattenfall Europe. Together, the companies are responsible for around 80 percent of the electricity generation.

A deregulation of the market has led to an increasing number of discount suppliers offering cheaper rates than the big four. However, the number of people who have canceled their contracts with RWE and the likes is smaller than expected. And the German government's Monopoly Commission last year issued a report that there still isn't enough effective competition in Germany's retail gas and electricity markets.

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