Green taxes, suppliers, wipe out German power savings

\"The high taxation levels are the result of the ecologically motivated legal framework,\" Bernhard Willbrand, head of energy research at the Essen-based RWI institute, told Reuters. \"Another reason why prices have recaptured pre-deregulation levels is the dominance of leading suppliers who can exert their power without having to fear loss of market share.\" Utilities RWE and EONG.DE tower over the supply side of the German electricity market. \"The market is dominated by RWE and E.ON...it is practically a duopoly,\" Andreas Meyer, CEO of leading power user DB Energie told Reuters. RWE and E.ON own 70 percent of German power generation as well as vast grids, and have used their power to raise prices, he said. Industry body VDEW said tax hikes will push up the average German household\'s power costs by six percent from January, eating up the price advantages brought by competition. \"A German household will pay the same for electricity in 2003 as at the start of market liberalisation in 1998,\" the association said in a statement. A three-person household\'s monthly bill would go up by three euros to 50 euros ($50.01) from January, with the share of state charges as part of the total bill at 41 percent, VDEW said. SUBSIDIES FOR GREEN POWER Industrial consumers have also been shocked at the speed with which Germany\'s newly re-elected social democrat/green government coalition has hiked taxes and phased out some tax exemptions. Partly, funds are needed to plug gaps in welfare budgets. But Willebrand said two thirds of the state share in power costs were indirect subsidies of environmentally friendly power as the government aims to cut down greenhouse gases emissions. The charges have gone up steadily since 1999, but industrial consumers have forced some exemptions to be able to operate competitively and protect jobs, consumer lobby VIK said. Retail consumers have borne the full brunt because utilities, who also own local grids, slapped on additionally high network charges, energy consumers\' lobby group VIK\'s legal expert Juergen Schulz told Reuters. In addition, January will see the fifth annual increase in the so-called eco-tax on energy use, which encompasses electricity consumption. Other additional charges will be made for the renewable energy law and to subsidise power and heat cogeneration. All three will also be subject to value-added tax. There is also a small charge levied to end consumers by local governments for use of their land for power transmission. VIK sees annual power supply prices for 2003 going up by five to 10 percent on average and more in individual cases. Story by Vera Eckert REUTERS NEWS SERVICE