Cancellation of power supply contracts by budget providers possibly illegal – German env min

The wave of short-notice contract cancellations by budget power providers in Germany is a “dramatic” development that cannot be accepted as it stands, new environment and consumer protection minister Steffi Lemke told newspaper Handelsblatt. According to early data seen by her ministry, many of the cancellations might have been illegal, Lemke said, adding that some providers have already received warnings from consumer protection agencies. She also said that expensive new contracts with local default providers that customers with cancelled contracts have had to fall back on are problematic. The prices in these contracts, which go up to 97 cents per kilowatt hour, cannot be explained by increased purchase and retailing costs, she added. “Perhaps this is a question for the courts,” the Green Party politician said. With a view to possible energy cost allowances for low-income households, Lemke said further support beyond already agreed payments is possible. “If people get into trouble despite the already planned support, the government coalition will act,” she said, citing reduced taxes on heating energy as a possible measure.

German consumers have started to become more and more affected as suppliers grapple with higher fuel acquisition costs caused by an energy crunch in Europe this winter. While some electricity suppliers have adapted their bills accordingly, others have terminated running supply contracts with consumers and several companies have filed for insolvency. Affected households automatically receive power and gas from their local standard provider ("Grundversorger", often the municipal utility) which usually charges higher prices than other suppliers. The German government has promised to look into short-term support for poorer households which are facing price hikes for electricity, oil, and gas

Several budget power providers in Germany have cancelled thousands of contracts with customers around the country since the end of last year, arguing that the energy price hike in European markets has made a continuation of the contracts’ conditions economically unviable. However, consumer protection organisations say this does not warrant cancellations. The Verbraucherzentrale Nordrhein-Westfalen announced it will sue against some default providers, as market analyses had revealed greatly exaggerated price differences between individual customers, with new customers paying multiple times the rates that existing customers pay, an unequal treatment that violates the rules of energy regulation, the organisation said. “Even if we understand the difficult situation of default providers, this is not acceptable,” said Verbraucherzentrale head Wolfgang Schuldzinski. “Burdening customers that have done nothing wrong to end up in a default supply setting is against the law,” he argued, saying the issue could eventually become a case for cartel authorities.