Stromwatch 3 Study: High Electricity Prices Due to Little Competition

Shortly before the German Parliament will decide about an extension of the operating times of the German nuclear power plants on 28 October, a controversial study commissioned by Bündnis ’90/Die Grünen criticizes a lack of competition in the German electricity market.

After two prior critical studies in late 2007 and early 2009, Prof Dr Uwe Leprich of the University of Applied Sciences of the state of Saarland again examined the role of the major utilities in the German electricity market.

Profits of E.ON AG, RWE AG and EnBW AG quadrupled since 2002 and amounted to EUR 23 billion in 2009, according to Prof Leprich and his co-author Prof Dr. Andy Junker. Compared with profits in markets with perfect competition, Essen-based RWE AG had charged its customers EUR 2.3 billion or 1.1. Cent/kwh too much, the professors concluded. In the case of E.ON, capital gains from speculative trading in securities meanwhile contributed largely to its profits, the professors said. If prices at the electricity exchange rise moderately, the three utilities can expect a net profit of EUR 70 billion if the operating times of the nuclear power plants are extended as proposed by the government.

RWE AG rejected the study’s findings and conclusions. RWE considered the study to be methodically wrong and misleading. There is strong competition in the energy markets. In addition, the government wanted to make nuclear power operators pay EUR 30 billion for the extension of nuclear power. This high financial burden was reflected in stock prices, which had declined since mid-2010.

By contrast, the president of the Monopolies Commission, Prof. Justus Haucap told Frankfurter Rundschau (FR) that competition with respect to the energy generation in Germany was imperfect. This situation was further aggravated with the extension of nuclear power. According to FR, the umbrella organization of the consumer protection agencies called competition in the German electricity generation market a farce.

“Power generation provides startling high returns of investment, well exceeding 25%”, vice-chairman of the parliamentary group of Bündnis  ’90/Die Grünen Bärbel Höhn criticized. This could only be explained with a lack of competition, which would still be intensified, if nuclear power stations were allowed to operate longer.

Sources: Study Leprich/JunkerFrankfurter Rundschau

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