The picture depicts the price cap for each day of 2023.
We started writing this article in March of this year. It was never finished, since the energy market in the Netherlands changed faster than we could type.
So, this article depicts moments in time, the time right now being July of 2023. It is not meant as the last word on energy prices, since everything is still too much in flux for us to make predictions about the future.
Here goes: Last year, in 2022, the Dutch cabinet decided that they needed to take measures regarding the high energy prices. Too many Dutch households had trouble paying their energy bills. At the same time, energy companies were making very large profits. In september, the government decided to subsidise everyone (with a small scale energy connection) with € 190,- a month, during November and December of 2022. This meant help paying the energy bills for users of dwellings, small businesses, small shops, etc. Basically everybody who pays the small scale consumer rates for energy. About six weeks later, the decision was taken to install a price cap or price ceiling for energy, for the whole of 2023. The system was put in place at the end of December, even though not all details were already that clear cut.
Now that this price cap system has been in place for a few months, it’s time to see how it has been working out.
First of all: what is it exactly? The price cap is a fixed price for all ‘kleinverbruikers’, [small scale consumers], which means energy connections for households, offices, small shops and small workshops. Most people have a small consumer’s connection and a small scale contract. (Large consumers have different contracts, their rates are different.)
You, me and everyone else pay the same set price for the first 1200 m3 of natural gas that we consume in 2023, the first 2900 kWh electricity and the first 37 GJ, gigajoules of heat in a heating network. The cap prices are set at € 1,45 per m3 gas, € 0,40 for electricity and € 37,38 per GJ of heat.
But how can we be sure that it is calculated fairly?
A system has been developed that divides the price cap for gas, electricity and heat into 365 parts, one part for each day. In such a way, that the price cap is higher on days when people use more energy and lower on days when energy consumpion is lower. In other words, during the winter months, the price cap is set much higher, because people will use more energy to heat their houses and to have the lights on. During the summer months the cap is set at its lowest. Data of average temperatures over a long period was used to calculate which temperatures and weather circumstances to expect at any given day.
What does this mean financially?
Suppose you get your annual final bill for your energy on June 1th, 2023. It will cover the previous year, as in: the previous twelve months. So, in this case: from June 1, 2022 till May 31, 2023. For 2022, you will have to pay the rates that were specified in your contract. You already paid a monthly deposit, so these two sums are compared. If you paid too much, you get some money back. If you paid too little, you have to pay the difference. From January 1, 2023 onwards, the calculation differs. You will have used a certain amount of enery every day, and for each day, the energy provider has seen whether you used less than the energy cap, or more. If you used less than the maximum on the cap, you pay the cap rates, if your use overshot the cap, the price of the remainder is calculated according to the rates in your current contract. This is all added up and voilà… the final sum you have to pay is clear. This is compared to your monthly deposits, and quite probably, you will have paid too much in advance nd you will get some money back.
This turns out to be the most honest way. The price cap for the remainder of 2023 will figure in the calculations next year, when you receive your next final bill, for June 1, 2023 till May 31, 2024. This way, it does not matter whether you receive your final bill on January 1, 2023, June 1, 2023 or October 1 2023, everyone receives the same benefits from the price cap for 2023. How things stand for 2024, is not clear yet.
om’s monthly email
In all probability, you are a customer of our national enery provider om | nieuwe energie. If you use a so-called smart meter, as a customer of om | nieuwe energie you will receive a monthly e-mail about your energy use in the month before. om | nieuwe energie monitors this use and gives a monthly overview. It gives you benchmarks to compare your energy use to other people in similar circumstances, living in an appartment building or a single-family house, as a single person household, a four people household, etc. It gets even more useful after a year, when om provides data about your own energy use in the year before. That way you can see for yourself if you are using less or more than the same month in the previous year, and why that could be. (Are you using less gas, did you buy LED lights, did you install this enormous television set?)
om | nieuwe energie also provides you with a calculation of how much the energy you used in the previous month will cost you. These numbers were quite high. This got some customers of om and members of Amsterdam Energie a bit confused. And they came to us for an explanation. Thing is: om | nieuwe energie has so far omitted the price cap from their calculations. The prices they give are based on your current energy contract. They in are in all probability much higher than the price you actually will be paying, once you receive your annual final bill. At that moment, your energy use is calculated for each day in relation to the price cap. Chances are, you will get some money back. So, do not worry about the prices mentioned in those e-mails.
Contracts and rates
Some energy companies are advertising with fixed contracts again, for one year or more. During the summer, the prices have gone down. So for the energy companies, it is possible to offer lower rates and fixed prices. This is also true for om | nieuwe energie. In some cases and with some contracts, the prices have taken a dive below the price cap. So this whole price cap situation right now is moot. That is to say: right now, in summer.
You can find om’s current rates on their website. Let’s look at the Flex contract, the most flexible contract, in which prices change every month. It is good to know that, with this Flex contract, for electricity, you can choose two kinds of rates. The first is one rate during the day and another during the night. You can choose the ‘normaaltarief’, the ordinary rate, together with the so-called ‘laagtarief’. This means that during the day from Monday till Friday, you will pay a different rate than during the night and on weekends. During the night (23.00-07.00) and on weekends you will pay the laagtarief. The lower rate.
The other option is the so-called ‘enkeltarief’, the single rate, the same price, seven days a week, 24 hours a day.
The two other kinds of contracts are the Variabel and the Vast, which will give you fixed prices for one year. They provide the same options, two rates or one.
Now, what is so interesting and special with the Flex contract, in today’s energy situation?
For decades, it was well known that the rate during the night was lower, because the demand for electricity was lower. People ran their washing machines or dishwashers during the night and at the weekends, since it was much cheaper.
Nowadays, this is not the case anymore. If you have a Flex contract with om | nieuwe energie, using electricity is cheaper during the day. During the day, there’s a surplus that needs to be used. The surplus is the result of solar panels, that provide energy during the day, but not during the night. From 12.00 tot 15.00, there is a surplus that energy companies do not know how to deal with in some cases, so prices go down. Use that dishwasher or washing machine at 14.00! It will save you money!
This may change during the winter months, but om | nieuwe energie will keep us informed.