+ A
A -
Agencies
Wholesale prices for gas and electricity are surging across Europe, raising the prospect of increases in already-high utility bills and further pain for people who have taken a financial hit from the coronavirus pandemic.
Governments are scrambling to find ways to limit costs to consumers as scant natural gas reserves present yet another potential problem, exposing the continent to even more price spikes and possible shortages if it’s a cold winter.
Nieves Leal, who lives in a working class neighbourhood in Madrid, has already seen her electricity bill increase from an average of 90-100 euros ($106-118) every two months two years ago to 158 euros ($187) in June, according to the last invoice. News of all-time high wholesale prices and the political debate around them has her worried since average prices have already risen 35% over the past year.
Leal, 63, earns 500 euros ($590) a month cleaning houses part-time. She and her daughter who lives with her have stopped buying clothes, downgraded their electric contract to the bare minimum to power appliances, and cook, do laundry and iron only after 2 p.m. or on weekends, when rates are down.
“It’s shameful, but I have no other choice,” she said. “Even if I made twice what I make, I don’t think any family can afford these abusive prices.” In the U.K., many people will see their gas and electricity bills rise next month after the nation’s energy regulator approved a 12% price increase for those without contracts that lock in rates. Officials in Italy have warned that prices will increase 40% for the quarter that will be billed in October.
And in Germany, retail electricity prices have already hit a record 30.4 cents per kilowatt hour, up 5.7% from a year ago, according to comparison site Verivox. That amounts to 1,064 euros ($1,252) a year for a typical household. And prices could go higher still since it can take months for wholesale prices to be reflected in residential bills.
There are multiple causes for the price increases, energy analysts say, including tight supplies of natural gas used to generate electricity, higher costs for permits to emit carbon dioxide as part of Europe’s fight against climate change, and less supply from wind in some cases. Natural gas prices are lower in the U.S., which produces its own, while Europe must rely on imports.
To mitigate the increases, Spain’s Socialist-led government has scrapped a 7% tax on power generation that was being passed on to consumers, cut a separate energy tariff on consumers to 0.5% from 5.1%, and imposed a windfall tax on utilities. Italy is using money from the emissions permits to lower bills. France is sending a 100-euro “energy check” to those already getting support paying their utility bill.
Italy’s ecological transition minister, Roberto Cingolani, said the government is taking steps to mitigate costs from “international circumstances” and “to ensure that the transition toward more sustainable energy does not penalize families.” Analysts at S&P Global Platts say electricity prices have risen due to strong demand from places like data centers and electric cars, but above all because of the rise in the price of natural gas used in generating plants. Utility companies’ exposure to natural gas prices has increased as emissions-heavy coal plants have been retired, while utilities face higher costs for carbon allowances required by the European Union’s emissions trading system, which is aimed at reducing emissions of greenhouse gases.
Natural gas prices have soared to a record above 77 euros per megawatt hour according to Europe’s TTF benchmark. Factors pushing up prices are strong demand in Asia and a move away from linking prices to the price of crude oil that exposes Europe more to market fluctuations.
Wholesale prices for gas and electricity are surging across Europe, raising the prospect of increases in already-high utility bills and further pain for people who have taken a financial hit from the coronavirus pandemic.
Governments are scrambling to find ways to limit costs to consumers as scant natural gas reserves present yet another potential problem, exposing the continent to even more price spikes and possible shortages if it’s a cold winter.
Nieves Leal, who lives in a working class neighbourhood in Madrid, has already seen her electricity bill increase from an average of 90-100 euros ($106-118) every two months two years ago to 158 euros ($187) in June, according to the last invoice. News of all-time high wholesale prices and the political debate around them has her worried since average prices have already risen 35% over the past year.
Leal, 63, earns 500 euros ($590) a month cleaning houses part-time. She and her daughter who lives with her have stopped buying clothes, downgraded their electric contract to the bare minimum to power appliances, and cook, do laundry and iron only after 2 p.m. or on weekends, when rates are down.
“It’s shameful, but I have no other choice,” she said. “Even if I made twice what I make, I don’t think any family can afford these abusive prices.” In the U.K., many people will see their gas and electricity bills rise next month after the nation’s energy regulator approved a 12% price increase for those without contracts that lock in rates. Officials in Italy have warned that prices will increase 40% for the quarter that will be billed in October.
And in Germany, retail electricity prices have already hit a record 30.4 cents per kilowatt hour, up 5.7% from a year ago, according to comparison site Verivox. That amounts to 1,064 euros ($1,252) a year for a typical household. And prices could go higher still since it can take months for wholesale prices to be reflected in residential bills.
There are multiple causes for the price increases, energy analysts say, including tight supplies of natural gas used to generate electricity, higher costs for permits to emit carbon dioxide as part of Europe’s fight against climate change, and less supply from wind in some cases. Natural gas prices are lower in the U.S., which produces its own, while Europe must rely on imports.
To mitigate the increases, Spain’s Socialist-led government has scrapped a 7% tax on power generation that was being passed on to consumers, cut a separate energy tariff on consumers to 0.5% from 5.1%, and imposed a windfall tax on utilities. Italy is using money from the emissions permits to lower bills. France is sending a 100-euro “energy check” to those already getting support paying their utility bill.
Italy’s ecological transition minister, Roberto Cingolani, said the government is taking steps to mitigate costs from “international circumstances” and “to ensure that the transition toward more sustainable energy does not penalize families.” Analysts at S&P Global Platts say electricity prices have risen due to strong demand from places like data centers and electric cars, but above all because of the rise in the price of natural gas used in generating plants. Utility companies’ exposure to natural gas prices has increased as emissions-heavy coal plants have been retired, while utilities face higher costs for carbon allowances required by the European Union’s emissions trading system, which is aimed at reducing emissions of greenhouse gases.
Natural gas prices have soared to a record above 77 euros per megawatt hour according to Europe’s TTF benchmark. Factors pushing up prices are strong demand in Asia and a move away from linking prices to the price of crude oil that exposes Europe more to market fluctuations.
