Germany reports highest electricity rates in survey
Of 16 countries included in a recent survey, Germany reported the highest electricity prices, although a recent court ruling against the country`s coal tax is expected to drop prices there in early 1996. The coal tax in Germany adds approximately 8.5 percent to the price of electricity. There is, however, speculation that the tax reduction will not be passed on to consumers, as the government may introduce a new energy tax.
The annual survey, by National Utility Service Inc., ran from April 1994 to April 1995, with all prices reported in kWh (see figure).
Spain had the second-highest rates, despite a 1.7-percent decrease in electricity costs. The decrease was attributed to low petroleum costs, which allowed electricity suppliers to pass on reductions to consumers. The price reduction helped ensure the government`s policy of keeping costs below the rate of inflation.
Austria`s prices were stable but high, as this country turned in the third-highest electricity prices. Suppliers there are discussing a breakup of the monopoly for electricity supply, but it is thought that Austria will wait and see what other European countries do and be a follower rather than a leader.
Belgian prices rose 2.7 percent, in line with inflation in that country. The Belgian electricity industry is preparing itself for future international competition and to meet a predicted increase in demand toward the end of this decade.
Italy had the fifth-highest prices in the survey, with a price increase exceeding 3 percent. The report stated the Italian supply industry has not undergone the changes forecast last year, and any reform has been disrupted by political upheaval. Planned deregulation there would affect only generators, with distribution still firmly held by the National Electricity Board, which is a monopoly.
After two years of rising prices, The Netherlands saw a small reduction in electricity cost. There has been a trend to merge supply companies and standardize tariffs in this region. Prices in The Netherlands are expected to keep pace with inflation during the coming year.
Rates in France fell for the second year in a row, with a 1.1-percent drop in electricity prices set against 1.8-percent inflation. It has been the French government`s policy to keep utility costs low to help control inflation.
Ireland`s electricity prices remained stable, and no changes are anticipated in the immediate future, although the European Union has targeted Ireland for a competitive market.
Rates in the United States rose 0.35 percent, below a national inflation rate of 2.9 percent. There is great pressure for deregulation in this country, and the utilities are merging, downsizing and trying a variety of other cost-cutting measures to produce low-cost, reliable electricity.
The United Kingdom saw a small decrease in electricity cost for larger industrial and commercial customers, but there is concern over future pricing trends. Greater reductions were expected, as the Regulator called for a 14-percent reduction in distribution charges. Charges were instead dropped only 8 percent for non-domestic users, and once they filtered down to the consumer level, reductions were less than 2 percent.
Prices in Finland rose only 1.4 percent during the survey period, below the 2-percent inflation rate. However, at the end of 1995, it is anticipated that prices will rise between 5 percent and 15 percent, as the Finnish government is proposing an energy tax.
Norwegian prices jumped 6 percent, significantly higher than the country`s 2-percent inflation rate. The increase is partially attributed to a rise in energy taxes on top of an increase in value-added tax. Norway maintains a fully competitive market, with municipalities being the main power suppliers. These municipalities have a main goal of providing local customers least-cost electricity.
Australian prices fell by more than 4 percent, against a 3.9-percent inflation rate. Supply in Australia is undergoing changes, as the electricity grid in the Eastern Seaboard is being linked. On completion, electricity will sell throughout the nation. Once the grid is established, businesses will be able to buy electricity by the half-hour in a system similar to that in the United Kingdom.
Prices rose slightly in Sweden, one of the lowest-priced countries surveyed. Over the past four years, the Swedish market has been preparing for deregulation, which will take place Jan. 1, 1996. Suppliers have been acquiring small distribution companies to strengthen their positions. Distribution companies have been joining together to form purchasing groups to wield more power against the big generators.
Canada had the second-cheapest electricity in the survey and only a 0.1-percent price increase. Ontario Hydro held rates steady for all but large customers, whose rates were cut by 7 percent. Political and consumer pressures in Canada are driving suppliers to cut costs through internal restructuring. Privatization is popular with industry and commerce but strongly opposed by unions.
South Africa had the lowest prices in the survey group. During the survey year, several changes took place. A National Energy Regulator, with broad powers, was introduced. All existing generators were given temporary licenses, but they will have to apply to make them permanent. Of the major distributors, Eskom has kept to its policy of increasing rates 4 percent, to reduce the real cost of electricity. Inflation in South Africa is well over 4 percent.