RWE sparks price war

German energy group RWE Energie AG is to cut its electricity prices to a level 20 per cent below those of its competitors. The move has started an electricity price war in the deregulated German market.

RWE is the first German producer to take such an initiative since the market opened in April. The move coincided with the announcement by the company of an ambitious European growth strategy under which it aims to reach DM125bn ($67.54bn) in annual sales by 2010.

The group`s growth plans hinge on it making acquisitions across Europe and positioning itself through energy trading ventures. The company is antici-pating investment volumes of DM5bn per year, according to chairman Manfred Remmel. RWE Energie will also launch a marketing programme to double its supplies to private households. It currently supplies 2.3m households, or six per cent of the market. Planned changes in third party access rules in Germany should help RWE reach this goal.

Liberalization of Germany`s electricity market has been slow to generate competition, although electricity prices are falling. Several energy groups, including the parent companies of PreussenElektra and Bayernwerk, are reported to be in merger talks. The Federal Cartel Office has said that it would be willing to approve such mergers.