The electricity rates that residential customers pay include the costs for the acquisition and sale of the electricity, the fees for using the electricity grid, and state-imposed price components. However, ‘state-imposed’ does not necessarily mean that these price components contribute towards the Federal Government’s budget. The state-imposed price components serve a wide range of different purposes and are levied in different ways. In the following section, each individual state-imposed component will therefore be looked at in more detail:
1. EEG surcharge
The EEG surcharge (renewables surcharge) finances the expansion of renewables. It provides the money to pay for the funding of electricity from wind, solar and biomass. It has made the advances in renewables possible by providing a reliable financial base for the last 15 years.
Under the Renewable Energy Sources Act (in German), power plant operators receive a market premium for every kilowatt-hour of renewable power that they feed into the grid over a 20-year period. The tariff is paid by a transmission system operator (TSO), but the operators need to market the electricity themselves. The market premium compensates for the difference between the feed-in tariff and the average trading price for electricity.
The difference between the spending on tariff and premium payments and the income from the marketing revenues of the grid operators (the ‘EEG differential costs’) is divided up across the power consumption as long as it is not fully or partially exempted from the EEG surcharge under special regulations. The resulting figure is the EEG surcharge.
By 15 October of each year, Germany’s four transmission system operators set the EEG surcharge for the following year. To do this, the TSOsconsult with recognised research institutions and prepare a sound, rigorous forecast of their expected expenses and their projected income from the sale of EEG power on the power exchange.
For 2018, the EEG surcharge has been set at 6.792 ct/kWh. This is slightly down on the previous year, in which the EEG surcharge was 6.88 ct/kWh. Find out more about the 2018 EEG surcharge here (PDF, 347KB) (in German).
2. CHP surcharge
The CHP surcharge was introduced in 2002 as part of the Combined Heat and Power Act.
CHP plant operators are entitled to a premium for the power they generate if they satisfy certain criteria. The Combined Heat and Power Act also sets out premiums for promoting the use of heating and cooling networks and of heat and cold storage facilities, and the terms under which these are to be granted. Once again, the grid operator is initially responsible for paying the premiums. The costs are then evenly distributed among the TSOs via a cost equalisation mechanism. If grid operators end up with net costs after the premium and cost equalisation payments have been made, they can include these costs in their calculation of the grid fees as long as they meet certain requirements. The CHP surcharge is levied wherever the electricity suppliers have agreed to provide the network access needed to supply residential customers and have included grid fees in their final price calculations.
In 2018, the CHP surcharge for supplying residential customers is 0.345 ct/kWh (compared with 0.438 ct/kWh in 2017 and 0.445 ct/kWh in 2016).
3. Surcharge under Section 19 (2) of the Electricity Grid Fee Ordinance
Final consumers can request an individual grid fee under Section 19 (2) Sentence 1 or Sentence 2 of the Electricity Grid Fee Ordinance (in German) if they meet certain criteria.
Individual grid fees can cause downstream operators of electricity distribution networks to lose revenues, however, and so transmission system operators must reimburse them for these losses. The transmission system operators are required to balance these reimbursements and their own lost revenues among themselves. The resulting lost revenues are passed on to all final consumers as a ‘surcharge under Section 19 of the Electricity Grid Fee Ordinance’.
In 2018, the surcharge for residential customers is 0.370 ct/kWh (compared with 0.388 ct/kWh in 2017 and 0.378 ct/kWh in 2016).
4. Offshore surcharge under Section 17f of the Energy Industry Act (EnWG)
The offshore surcharge was introduced in 2013 in order to create a reliable framework for the expansion of offshore wind energy. This includes providing clarity on the extent to which plant operators can claim compensation from grid operators. Under Section 17f (5) of the Energy Industry Act, grid operators have the right to charge final consumers a surcharge on grid fees in order to recover the costs of compensation paid for delays in connecting offshore plants to the grid or due to technical problems with these connections.
To protect consumers, the offshore surcharge is capped at 0.25 ct/kWh. A significant share of any costs of compensation must be paid by the operators of offshore wind farms and transmission system operators themselves. This ensures that the burden is shared fairly between TSOs, operators and consumers. In addition, the time during which a particular offshore wind farm receives compensation is deducted from the time during which this wind farm receives funding under the EEG at the end of the funding period.
In 2018, the surcharge for residential customers is 0.037 ct/kwH (compared with -0.028 ct/kWh in 2017 and 0.040 ct/kWh in 2016).
5. Section 18 of the Ordinance on Interruptible Loads (AbLaV)
The surcharge for interruptible loads has been levied on final consumers since 1 January 2014 and covers the costs of interruptible loads, which are used to maintain grid and system stability.
Under the ordinance, suppliers of interruptible loads are entitled to participate in auctions and offer their interruptible load capacity to transmission system operators. This is paid for by the transmission system operators.
The transmission system operators balance their costs amongst one another and finance them by passing them on to all final consumers through a surcharge of the same amount per kilowatt hour. The surcharge is set once a year and adjusted on 1 January. For 2018, the surcharge has been set at 0.011 ct/kWh (compared with 0.006 ct/kWh in 2017 and 0 ct/kWh in 2016).
A revised version of the ordinance entered into force on 1 October 2016.
6. Concession fee
Concession fees are paid by grid operators to municipalities for using municipal rights of way. The municipality and the grid operator enter into a formal agreement setting out the exact amount of the fees to be paid, with the maximum concession fee being specified in the Concession Fee Ordinance (KAV).
In accordance with Section 2 (2) of the Concession Fee Ordinance, the maximum concession fee that has to be paid for the supply of tariff customers is determined by the number of inhabitants of the municipalities. It ranges from 1.32 ct/kWh for municipalities of up to 25,000 inhabitants to 2.39 ct/kWh for municipalities with more than 500,000 inhabitants. According to the 2017 Monitoring Report compiled by the Bundesnetzagentur and the Bundeskartellamt, the concession fee for the supply of residential customers averaged 1.62 ct/kWh in 2017 (compared with 1.65 ct/kWh in 2016).
7. Electricity tax
In 1999, the Electricity Tax Act introduced a tax on electric power. It is to help achieve climate policy objectives by encouraging a more sparing use of electricity. It also serves to lower and stabilise pension contribution rates. Part of the tax revenue from the electricity tax goes toward reducing contribution rates for social security.
The tax is levied on electricity drawn from the public grid for consumption or on electricity that is generated and used by the consumers themselves. The tax is collected from either the utility or consumers, if these generate their own electricity. In most cases, electricity is drawn from the grid by a final consumer. If this is the case, the tax is owed by the utility providing the electricity. If the consumer themselves generate their own electricity, the tax will be levied from them. The customs administration is responsible for collecting the tax, which accrues to the federal budget.
The current tax rate on power supplied to residential customers is 2.05 ct/kWh.
8. Value-Added Tax (VAT)
As set out in the 1994 German Value Added Tax Act, products and services supplied by businesses to customers are usually subject to value-added tax. The VAT is ultimately borne by the final consumer. The supplying company merely serves as a trustee: it collects VAT from customers and, since only businesses owe VAT, pays it over to the tax office.
VAT revenue is shared between the Federal, Länder and municipal governments based on formulas set out in the Fiscal Equalisation Act (FAG).
The VAT rate for electricity is 19% and is levied on the total amount made up of generation and sale, grid fees and other state-imposed price components.