To ensure that the poverty rate does not increase for around 1 million households in the coming year, a successor to the Emergency Fund is necessary. At the end of this year, the price ceiling will expire; a generic measure that also reduces energy costs for households that don’t actually need it. And although energy prices have somewhat stabilized, the energy crisis is not over yet. The energy prices are expected to not return to the pre-crisis level, which is why targeted support for the most vulnerable households is unavoidable.
Position Energy tariffs energy & gas (general)
1. Energy tariffs energy & gas (general)
High energy prices The wholesale energy market works like any market: supply and demand determine the price. For example, if we look at the housing market, we can see that prices shot up due to the limited availability of residences and the high demand. The prices are no longer directly related to the construction costs once incurred. The same is true for energy. By ceasing to use Russian gas, supply dropped while demand remained intact. As a result, prices have risen. Companies worldwide are bidding against each other to buy the scarce gas that is still available. This is particularly problematic for lower and middle incomes earners. Energie-Nederland has always advocated that the most vulnerable people should be compensated by way of an income-based measure.
The only way to structurally lower costs is to use less energy. Energy saving is possible through insulation or heat pumps, for example. Or by accelerating the switch to renewable energy such as solar panels and wind turbines. Supply can also be increased, for example by increasing our import capacity of liquefied natural gas. It all contributes to lowering costs.
1.1 Energy bill structure Energie-Nederland advocates for clear energy bills for consumers. A clear bill contains comprehensible information that helps consumers to make decisions about their energy consumption, the type of contract, the supplier, etc.
Energy bills list supply charges, grid management charges, taxes & government levies and other charges. Supply charges vary by supplier. These are made up of variable consumption charges and fixed charges. The grid management charges are the costs for connection and the transportation of electricity and gas. These charges are remitted to the grid operator by the supplier. The taxes and government levies are charged by the government, who also sets the amount. This concerns the energy tax based on energy consumption and the VAT. The supplier remits these amounts to the government. In addition, there may also be charges for other products and services, such as administration fees or discounts. For an example of the structure of an energy bill, see also: https://www.consumentenbond.nl/energie-vergelijken/energierekening.
1.2 2023 Price cap (and margin test) for small-scale consumers Energie-Nederland is satisfied that the price cap for small-scale consumers managed to be introduced on January 1 2023. This will help households pay their energy bills, and prevents late payments and mounting payment arrears. The central government has asked energy suppliers to introduce a price cap. This does include a gross margin limitation for the volume over which discount is given.
Energie-Nederland understands there are questions about the way the compensation is calculated for passing on the discount. Misuse should be impossible no matter what. The Authority for Consumers and Markets (ACM), the Netherlands Enterprise Agency (RVO) and auditors monitor this in various ways.
Energie-Nederland points out that energy companies need a margin to absorb past and future setbacks. They also need to be able to make investments for the energy transition. The industry association hopes that the current agreements on this will not turn out to be prohibitive.
As energy prices are expected to remain high beyond 2023, the industry calls on the State to prepare other measures in a timely manner. This would mean compensation can be more targeted after 2023.
1.3 2024 Price cap Despite the drop in gas prices, the price of energy is still high compared to a few years ago. Despite this, more and more energy companies are offering variable contracts with prices below the price cap.
These price cap tariffs for all of 2023 including taxes are:
€0.40 per kWh of electricity
€1.45 per m3of gas
€ 47.38 per GJ district heat
It is expected that the energy prices will remain high beyond 2023. That is why Energie-Nederland is calling on the State to prepare other measures in time for more targeted compensation after 2023. Energie-Nederland does not support a continuation of the price cap in 2024. The industry association believes there should only be an arrangement for the targe group that needs compensation. This concerns lower-income households, possibly in combination with (relatively) high energy consumption.
It goes without saying that energy suppliers do not hold income data and should not be given access to this type of sensitive information. Energie-Nederland does not want to cooperate on generic measures such as a price cap. As such, we do not support the introduction of a social tariff, like in Belgium.
1. Contracts There are roughly three ways to negotiate prices with an energy supplier. These are fixeed, variable or dynamic rates. For a fixed price, you also agree a fixed term. The best type of contract depends on the needs and the circumstances of the consumer.
Energie-Nederland supports free market forces. This means our members have to be able to respond to the needs of their customers. Energy suppliers will always make efforts to attract new customers and to retain existing customers. This results in better quality and lower prices.
1.1 Fixed price and fixed term contracts For this contract, the supplier and the customer agree on a fixed price per kWh or m3 for a fixed term, often 1 year, 2 years, or 3 years. Some suppliers even offer a 5-year fixed term.
The fixed price only applies to the kWh or m3, not to the taxes, government charges and network charges. Changes by the government and grid operators do get passed on to the customer, usually as of January 1 of a calendar year when these tariffs are changed.
The supplier’s fixed costs could also change.
Fixing a price for a longer term has advantages, but disadvantages too. The advantage is that you know where you stand in terms of the price per kWh or m3, and that the increase in these prices does not affect you during the term of your contract. One disadvantage is that if these prices drop you won’t see this effect either.
Energie-Nederland believes that customers respect the agreed term and only start researching new contracts after it ends. The cancellation fee, adjusted as of June 1 2023, offers suppliers certainty that they will not incur losses on energy already purchased for the terms of these contracts.
1.2 Variable price contracts For this contract, the supplier and the customer agree that the price per kWh or m3 can be changed every so often. It is agreed upon in the contract when the price changes. This could be six-monthly (on January 1 and on July 1), but also quarterly or even monthly. The new price is communicated to the customer in good time, and at that point, the customer can choose to switch to a different contract. At other times, the contract can be cancelled with (usually) 30 days’ notice.
The variable price only applies to the kWh or m3, not to the taxes, government charges and network charges. Changes by the government and grid operators do get passed on to the customer, usually as of January 1 of a calendar year when these tariffs are changed.
The supplier’s fixed costs could also change.
A variable price has advantages, but disadvantages too. The advantage is that the price can adjust quickly to market conditions. A price drop in the wholesale market is more quickly reflected in the price. Also, you have more flexibility in switching to another contract. One disadvantage is that if these prices rise, you will also see this effect more quickly as well.
Energie-Nederland certainly sees a role in the market for this type of contract. For many consumers, this is a good alternative for fixed-term contracts.
1.3 Contracts with dynamic pricing For this contract, the supplier and the customer agree that the price per kWh or m3 per hour or per day are based on the spot market (day ahead market). The customer pays the supplier these prices with a small surcharge per kWh or m3. You know the next day’s rates the afternoon beforehand.
Generally, consumption is billed immediately on a monthly basis, so monthly costs vary and have a seasonal pattern. The contract can be cancelled with (usually) 30 days’ notice.
The dynamic hourly or daily rate only applies to the kWh or m3, not to the taxes, government charges and network charges. Changes by the government and grid operators do get passed on to the customer, usually as of January 1 of a calendar year when these tariffs are changed.
The supplier’s fixed costs could also change.
A dynamic price has advantages, but disadvantages too. The advantage is that you immediately pay the spot market price (with a small surcharge). Dynamic pricing allows you to adjust your consumption according to the price of the moment. This means you have more direct influence on your energy costs. Also, you have more flexibility in switching to another contract. One disadvantage is that dynamic prices can fluctuate wildly. If the price is – temporarily – very high and you are not in a position to adapt your consumption, you will face higher costs for that period.
Energie-Nederland sees advantages to such a contract particularly for customers with high electricity consumption they can control. In doing so, consumers can help bring volatile renewably generated electricity into the market.
1.4 Cancellation fee
New cancellation fee effective June 1 2023 Energie-Nederland is satisfied that there will be a new reasonable cancellation fee and that this will be set in a market-based manner. These are situations of a breach of contract where fixed-term contracts are terminated broken early. This reduced the risks for energy supplier in the current market conditions. The industry association haslong advocated for this.
The new calculation method offers more certainty for energy suppliers. What more, it means offering fixed price contracts becomes an option again. Energie-Nederland believes this is a good development. Also because of the uncertainty of sharp price rises and/or drops in the wholesale market. And the same is true for the financial collateral required for long-term procurement.
The Consumer & Market Authority’s (ACM) proposal, incidentally, is in line with European legislation. This has yet to be passed into law in the Netherlands, where compensation for economic loss must be assumed.
Even so, the current more stable price trends in wholesale markets are already making it possible for energy suppliers to tentatively offer fixed-price contracts again.
The cancellation fee should also involve well-regulated consumer protection. That is why the Consumer & Market Authority (ACM) and energy suppliers feel customers should not be surprised by a cancellation fee they have to pay once the fixed price contract is terminated early without them cancelling first. As soon as a new contract is in place, the new supplier must notify the current supplier of the intended switch straight away. The current supplier can then inform the customer within the legal cooling-off period of 14 days about the consequences of early termination of the fixed price contract. The customer may then reconsider the switch first. Care in implementing this is a priority for energy suppliers.
That is why this cancellation fee will be adapted no later than June 1 2023.
1.5 Disconnection policy
New disconnection policy effective April 1 2023 Energie-Nederland stresses that energy suppliers make every effort to help customers as much as possible. Multiple attempts to make contact with the customer and, where necessary, agree on a payment schedule are a natural part of this. As such, Energie-Nederland is quite happy with the changes to the rules as they have now been adopted.
Position Notice period for tariff changes
Recommended 30-day term for price changes The law states that consumers have a cancellation notice periodof up to 30 days. The Consumer & Market Authority (ACM) has now implemented this 30-day period for a tariff change announcement by the energy supplier. However, this is not stipulated in law.What’s more, when such an announcement is made, customers can switch immediately if they wish.
Energie-Nederland is surprised at the Consumer & Market Authority’s (ACM) position on the notice period for tariff changes in the case of an agreement with flexible prices. The industry association regrets the public uproar this has caused.
Position Feed-in scheme
Energie-Nederland is in favor of phasing out the feed-in tariff. This scheme offsets small-scale consumers’ consumption against the electricity feed back into the grid. The feed-in tariff stands in the way of correctly valuing (generated) electricity. What’s more, it is unfair. This is because the costs of the scheme are also borne by consumers who do not generate electricity. Moreover, feeding in firstly frustrates maximum self-consumption or storage of the electricity generated. Secondly, it gets in the way of the demand response that is desired both in the market and for optimal grid usage. With electricity prices likely to remain high, there is no reason to maintain the electricity feed-in tariff.
We are in favor of the net metering scheme and at the same time, Energie-Nederland disagrees from the outset with the phase-out system as indicated in the Ministry of Economic Affairs and Climate Policy bill. This methodology is not in line with the outcome of the study at the basis of the decision to discontinue the feed-in tariff. According to the results of this study, the feed-in tariff should be replaced with a compensation for electricity returned to the grid. It is this compensation that is then phased out.
Against all advice, the Ministry of Economic Affairs and Climate Policy chose to maintain the feed-in tariff and phase it out over the years. This will result in illegible energy bills until 2030, as it requires working with percentages of measured feed-ins. This makes it impossible for customers to ascertain the volumes based on meter readings.
Position District Heating tariffs
District heating companies set their rates based on their costs. Subsequently, they adapt these using the Consumer & Market Authority’s (ACM) established maximum tariffs. These maximum tariffs are based on the No-More-Than-Usual (NMDA) principle. The Consumer & Market Authority (ACM) oversees these tariffs. On the one hand, this is done by setting a maximum tariff and on the other hand, via the performance test.
In recent years, district heating companies have operated below the maximum tariff set by the Consumer & Market Authority (ACM). In addition, the returns achieved in the heating sector have been limited since the start of the Consumer & Market Authority’s (ACM) efficiency monitor. This means that district heating companies are already fulfilling the cost-plus model, as announced in the new Collective Heating Act.
Energie-Nederland is in favor of abandoning the NMDA principle and encourages switching to cost-based tariff regulation. A number of matters are important for a meticulous transition:
The cost-plus model, like the NMDA principle, should be divided into fixed charge and usage-related portions. Fixed costs should be reflected in the fixed charges as much as possible. The variable costs should be reflected in the usage-related portion.
The performance test gives the Consumer & Market Authority (ACM) the power to intervene on tariffs in case of excess returns. This test is the regulator’s main steering tool to ensure reasonable rates over the medium term. The Consumer & Market Authority’s (ACM) maximum tariffs are actually intended to safeguard reasonable tariffs in the shorter term.
Even if the gas reference is abandoned in rate regulation, developments in gas prices continue to play a role for heating charges. Even when the cost-plus model is implemented, there is correlation between the regulated maximum tariffs and gas and electricity prices.
The maximum reasonable return that district heating companies are allowed to achieve on their invested capital must be a good reflection of the heating sector’s risks. It would mean investments in the heat transition continue to be possible, and allow companies to run their business operations in a healthy manner.
Trade association of almost 90% of the market for producers, suppliers and traders of electricity, gas and heat.