Lower Payments
thanks to higher Efficiency
Exploding fuel prices on the supply side drove tariffs up sharply until mid-2008, mainly for gas, but also for electricity. Spread over the whole year, the picture that emerges is different. In the EU countries, developments varied widely according to an OECD inflation study: whereas prices fell in France by 6.5 percent and in Switzerland by 10.3 percent, the price level changed very little in Germany and Italy. The UK experienced the biggest price increase with 12.5 percent. In the media, an increasing number of customers' payment difficulties were blamed on the large energy utilities. However, little was reported about the extreme tensions in the supply markets.
Criticism of the Price Development in the UK
Throughout 2008 all of the energy utilities in the UK came under increasing media pressure over the extent and level of the price increases they imposed on their customers. The increases were of a level never previously seen in the UK before and led to a number of charitable organizations - including Age Concern - publicly stating that vulnerable groups could suffer as a result.
Different Conditions Determine the Price of Gas
With the financial crisis and the consequent sharp falls in the oil price, utilities' high energy prices vanished from the headlines again. However, relief came only slowly. In Germany, due to oil price controls the price is coming down with a six-month delay, as the price for natural gas is derived from the average price of oil during the preceding six months. This does not apply in the UK, which explains why the price of gas rose rapidly in 2008 and has fallen again quickly at the start of 2009.
High Price of Electricity Continues
Our supply companies' electricity prices are not merely driven by the price on the electricity exchanges. In part, we also obtain forward prices to ensure prices in the long run. However, our leeway for altering prices is very small, since we need to remain an economically viable company and cannot therefore disengage from world market prices. Even if these have fallen drastically since September 2008, the price of electricity for consumers is tending towards a gradual rise in the long run, due to long-term increases in electricity and fuel demand the world over. Other particular developments also influence prices, such as Germany's plan to exit from nuclear power. If Germany holds onto this goal, then prices will continue to have an upwards tendency.
Lowering Costs by Saving Energy
The most effective way of lowering energy costs is to reduce consumption through efficient use of energy by consumers . E.ON helps its customers to lower energy consumption significantly through advice, intelligent consumption metering and support in the conversion to more efficient heating systems and domestic appliances, amongst other efforts. This strategy is in E.ON's long-term interest too, since our customers and society expect our support on the path towards efficient energy use. Service around energy efficiency will become an important competitive advantage and a new area of business in the increasingly hard-fought energy market. To the extent that we manage to reduce our sales volume, we need to replace or create less production capacity to ensure the security of the energy supply. In times of crisis, this saves investments and valuable resources.
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