Electricity and gas prices in the spotlight

Luxembourg residents saw a substantial drop in their electricity prices in the second half of last year, meanwhile the cost of gas rose significantly.

The only price drop in Europe

The average cost of electricity to households fell by 4.9 percent to 16.6 euros per 100 kWh, compared with the last six months of 2010, marking the only decrease in Europe, according to a eurostat study.

At the same time gas prices, which are linked to market fluctuations in oil prices, saw a significant 22 percent increase in Luxembourg.

“Every country has rises and falls in electricity prices. It really depends on how we buy it. In the past we have had drops of up to ten percent,” explained the commercial director of energy firm Enovos, Jean-Luc Santinelli, adding: “For gas, if you look at other countries, the trend is for the price to rise.”

European evolution comparison

Compared with other European countries, the cost of electricity to households including VAT and other taxes remains below the EU average of 18.4 euros per kWh. However, excluding VAT and taxes, electricity in Luxembourg was ranked around the eighth most expensive in Europe.

Among the 27 EU member countries, electricity costs grew by on average 6.3 percent with Latvia seeing the highest price hike of 27.5 percent. The UK saw the highest increase in gas prices, growing 27.2 percent to 5.2 euros per 100 kWh, compared with the average EU increase of 12.6 percent (6.4 euros per 100 kWh).

The cheapest state for purchasing electricity was Bulgaria at 8.7 euros per 100 kWh, meanwhile consumers paid the least for gas in Estonia where it cost consumers on average 4.4 euros per 100 kWh.

Gas price fluctuations explained

Mr Santinelli explained that fluctuations in gas prices are directly connected to oil values. Suppliers are committed to long-term contracts of up to 20 years to ensure security of supply to a country however, there may be a time lag between the changes in oil prices and how they impact the cost of natural gas. This, he said, is because the gas price applied over a specified period is calculated based on average prices of petroleum products listed in the preceding months.

VAT and taxes also play a significant role in the fluctuations of gas prices in Europe. According to report co-author John Goerten, this explains many of the differences in price from country to country. Denmark, for example, applies a 50 percent tax on gas.