Exclusive Exclusive: German Utilities Lobby Opposes Rate Cuts

Germany’s utilities have warned that a move by regulators to reduce energy costs for consumers will weigh heavily on their bottom line, according to a letter obtained by Handelsblatt. In a letter to regulators, the German Association of Energy and Water Industries has warned that rate cuts would have a “massive effect on the returns” of large energy companies like E.ON and RWE as well as small municipal utilities. The Federal Network Agency, which regulates Germany’s gas and electricity grids, has moved to cut the interest that utilities receive on investments in network infrastructure. These rates are passed as costs in consumers’ energy bills. The interest rates will fall from 9.05 percent to 6.91 percent for new infrastructure and from 7.14 percent to 5.12 percent for old infrastructure. Returns would fall by 24 and 28 percent respectively. German utilities are already under tremendous financial pressure due to the country’s transition away from fossil fuels and nuclear power. Subsidies for solar and wind energy have created an electricity glut that has led to steep decline in wholesale electricity prices. RWE, for example, received €27 ($29) for a megawatt hour of electricity on the European Energy Exchange in Leipzig in July. Four years ago, the utility received twice as much. In the first quarter of 2016, RWE saw its earnings before tax and interest collapse by 20 percent. The utility’s coal, gas and nuclear plants brought in €354 million compared to €441 million the year before. Read the full story in Handelsblatt Global Edition on Friday. Picture Source: DPA