The German government is planning to introduce tighter controls on the energy sector, to better protect customers from huge price increases when their contracts are terminated at short notice.
Government stepping in to regulate energy sector
With energy prices soaring across the continent, many struggling low-cost electricity and gas providers have cancelled thousands of contracts at short notice. For customers, this means a hectic run-around to try to find an alternative supplier, and in the meantime being put on the so-called substitute supply with a basic supplier in their area. Both usually come with a major price hike.
Now, the newly-formed Ministry for Energy and Economics wants to step in and better protect customers from situations like these, by putting a stop to short-notice terminations. In future, gas or electricity companies will be obliged to give at least a few months’ notice of a contract termination, to allow the customer enough time to find a new supplier.
The ministry also wants to create uniform tariffs for basic energy supply, so that new customers do not find themselves paying two or even three times as much as existing customers. According to a position paper by the Federation of German Consumer Organisations, some new customers have ended up paying as much as 1.654 euros more per year than existing customers.
This is because many companies are now creating different tariffs for new and existing customers. In the past, they have been able to offer low prices to customers by bulk purchasing low-cost energy in advance. But with supply issues and the effects of the coronavirus pandemic causing wholesale prices to skyrocket, many suppliers have found themselves forced to buy energy at high prices to keep up with customer demand. Some have therefore started to charge higher tariffs to new customers.
Sudden contract terminations can be shocking for customers
“We must not leave consumers out in the cold like this again,” said Oliver Krischer, parliamentary state secretary in the Federal Ministry of Economics. “This was and is a great burden for many people and a huge shock to suddenly find a notice of termination in the letterbox.”
“There is a need for action,” Krischer added. “We therefore want to raise the hurdles for discontinuing supply and put the instrument of basic and substitute supply on new footing.” He also said that the Federal Network Agency was looking into new ways to filter out disreputable companies.