Beginner’s Guide to the German Electricity Market
Whether you’ve just moved into a new place or been staying in Germany for a while, the energy market in Germany is tricky, confusing and sometimes downright scary given how high the prices are even though you know your consumption has been relatively constant! To top it all off, as an expat, the German language is always a barrier for you, be it understanding the terms of your contract, or dealing with customer service.
Lost and need some help!? Here’s a quick guide in assisting you to make a better-informed decision about an electricity provider
Germany Electricity Market Overview:
In Germany, you will have to pay two separate energy bills
- Warmmiete: Water and heating costs included in your rent and paid to the landlord.
- Kaltmiete: Utilities like electricity paid to a power company.
This means you have to sign-up with an energy supplier and pay them directly for electricity.
Moving to a New Place?
If you are moving to a new place and have not signed up with an electricity provider, don’t worry. You will still have electricity at your new location. The default electricity service in your region or Grundversorgung will automatically be applied to you. Keep in mind, since it’s easy and requires no effort on your side, the basic supplier costs are always higher, and hence you should switch to a different supplier as soon as possible.
Note: In exceptional cases, depending on the rental contract, you might be unable to choose your electricity provider. Make sure to check this detail as it could cost you a lot of money.
How are Electricity Prices (Strompreise) Calculated?
Depending on your location and the number of people in a household, companies estimate your consumption on a yearly basis and then offer you a monthly price. The rate includes a base price(Grundpreis) plus a fixed amount per kWh (Arbeitspreis).
Generally, the estimated consumption(Verbauch) for a year is 1500 kWh for one person and 1000 kWh per extra person in the household. It can vary significantly based on your location and lifestyle.
For example, if your consumption is 1500kWh per year and your supplier charges a base price of 10€ per month and 0.25€ per kWh, then you will end up paying 10x12 +0.25x1500 = 495€ per year or 41.25€ per month.
Remember, the price provided by the companies is based on estimated consumption. Hence, you could end up paying more or getting a refund based on your actual consumption during the year, which could higher or lower than estimated consumption.
After the first year, your monthly price will be based on your previous year’s consumption and thus is likely to change.
How to change your Electricity Provider (Stromanbieter)?
It is straightforward and convenient to switch your electricity provider. There are two ways to do so
- You can either terminate your current contract yourself and apply for a new one or
- Simply sign-up with a new provider and ask them to cancel the current contract on your behalf.
Signing up with an Electricity Provider(Stromanbieter):
You can sign up with a provider through their website or a price comparison one. Just go to the website and enter the following details:
- Postal code (Postleitzahl)
- The number of people in the household
- Or yearly estimated energy consumption (Verbrauch) in kWh
After you enter these details, you are offered a monthly price. If you like it and want to proceed, you will need the following information to switch to a new supplier:
- Electricity meter number (Zählernummer): It can be found in the Handover protocol (Übergabeprotokoll) if you are just moving to a new place. Alternatively, you can ask your property manager (Hausverwaltung) or landlord for it.
- Move-in date: The date of handover of the keys when moving in. It is only required if you move into a new place.
- Personal details: Like your name, address, date of birth etc.
Please note: You will only switch to a different electricity supplier if the current energy contract is in your name. It won’t be possible to do if the contract is in your landlord’s name.
Essential Terms in an Electricity Contract (Stromvertrag)
The German energy market is very competitive yet not at all transparent. Each provider will try to lure you in with bonuses, price guarantees etc. However, the terms and conditions can be very tricky and rigid.
So, here is a list of things you should consider before choosing or switching an energy provider:
Contract Duration or Minimum Contract Duration
(Vertragslaufzeit or Mindestlaufzeit )
Energy contracts are usually made for a duration of 12-24 months. Meaning you will be locked in with the company for the duration of the contract. If you are dissatisfied with the service, you will be able to terminate the contract but cannot switch to a new provider until the minimum duration of your contract is over.
You need to be aware of it; otherwise, your contract automatically renews for another year or two even if you want to terminate it.
It tells you how quickly how can quit your contract. Basically, how much in advance do you need to notify your provider of termination.
The shorter the contract, notice and renewal period, the more flexibility you will receive.
Electricity prices fluctuate and will increase over time due to high demand or several other reasons. To lure customers, suppliers guarantee a fixed Arbeitspreis or per kWh price for a certain period of your contract. After which, your costs might skyrocket even if your consumption has remained the same.
You typically pay a monthly instalment for the duration of your contract. At the end of the year, you either get a refund or pay extra based on your consumption. However, a company may ask you to pay a lump sum amount in advance to receive a specific tariff plan. Avoid it because the company could go bankrupt, and you could lose your money.
Suppliers will offer you heavy discounts called ‘bonuses’ such as Sofortbonus (Instant Bonus) or Neukundenbonus (New customer bonus) to sign up with them. It might look attractive, but don’t be fooled because they are only valid for the first year. Plus, the payments of the bonuses have very specific conditions. So, what might look great on the face value can cost you in the long run. Make sure to check out all the details. Find out why switch portals are not good for customers.
Sources of Energy
The current mix includes nuclear, fossil fuels and renewable sources like wind, solar etc. It is a misconception that renewable energy (Ökostrom) is more costly. In fact, due to government subsidies, the prices for 100% renewable energy are comparable to or even cheaper than fossil fuel tariffs. Just because it’s green does not mean it’s more expensive! Not only will they be good for you, but also for the planet!
Given Germany's old-school approach of everything in person, you would have been delighted that the sign-up process is online. But, don't be fooled! Just because the sign-up was online doesn’t mean the entire customer experience can be done digitally. You will still receive invoices in the mail and or have to call up customer care for queries. Even if your supplier does offer an app to track consumption, chances are it will be in German!
Language of Instruction
All providers only offer German as their language of instruction. They might advertise changing the language of instruction by using Google Translate plug-in or a helpline that provides English support, and we all know how well that works out! Disaster
Suppliers will offer you a bunch of different tariff plans with different pricing based on contract length, price guarantees, bonuses, sources of electricity and level of customer support. The plans are intentionally confusing to trick you into longer periods of service with higher prices.
To ensure price stability and fairness Ostrom has only a single tariff. With our flexible and transparent electricity plan, you can save money and the environment. And our services are available fully in English! German too if you want to practice and improve your language skills. Calculate your savings now!