Heat suppliers remain, on average, 18% below the maximum tariffs, while abuse does not seem likely
Heat suppliers did increase their tariffs for 2022 considerably, but they did remain, on average, 18% below the maximum variable tariff. This has been revealed by a preliminary analysis carried out by the Netherlands Authority of Consumers and Markets (ACM) of the tariffs charged by licensed heat suppliers. The increase in the tariffs is largely explained by the increase in energy prices. Four heat suppliers do charge the maximum tariff, but only do so for heat networks that only use natural gas for heating. These suppliers charge a lower tariff for users that are connected to heat networks that use other sources.
At first glance, the suppliers have thus heeded the call made by ACM not to increase heat tariffs unnecessarily, and not to abuse the maximum tariffs in order to boost profits.
Manon Leijten, Member of the Board of ACM, comments: “When setting the maximum heat tariffs last December, we called on heat suppliers only to raise their tariffs if that was necessary to cover the increased costs. Suppliers have significantly increased their tariffs because of the high energy prices, but, as of yet, no abuse has been established regarding higher profits. We will continue to keep a close watch on suppliers.”
The Dutch Heat Act stipulates that, each year, ACM must set the maximum supply tariffs for heat on the basis of the natural-gas price, using a statutorily prescribed method. Since the natural-gas price had already risen dramatically by the time ACM had to set the maximum heat tariffs for 2022, the maximum heat tariffs went up accordingly. Heat suppliers must always stay below the price cap set by ACM. The increase in the natural-gas price has no effect on the price cap for 2022.
When setting the heat tariffs for 2022, ACM calculated that the total costs for an average household that is connected to a heat network could rise no more than of 67%. ACM’s analysis reveals that the total costs at the five largest suppliers have gone up by, on average, 41%.
For consumers, this is obviously still a considerable increase in their energy bills. That is why ACM has also looked into the reasons for the increase, by asking suppliers for an estimate of their purchase costs for energy. It turns out that the purchase costs for natural gas, electricity, residual heat, and renewable energy have risen substantially for heat suppliers. The purchasing policies of heat suppliers vary considerably among those businesses. Some suppliers have fixed their purchase prices for a longer period of time, while other suppliers cover their purchasing risks using all kinds of hedging.
Of the heat suppliers contacted for this analysis, seven expect to earn a higher return in 2022 than in the prior year. With regard to these suppliers, no indications of abuse were found, because those increases can be explained from a business perspective, for example, because they had a negative return in 2021 or because of cost trends.
In 2022, ACM will conduct a further analysis of the returns of licensed heat suppliers. In addition, ACM will keep an eye on reports of increased heat tariffs at, for example, non-licensed heat suppliers. On the basis of those findings, ACM can determine whether it is necessary to use the return assessment. For that return assessment, ACM is currently developing a method for assessing whether or not returns of heat suppliers are reasonable. In that process, ACM also involves the heat sector as well as representatives of users. ACM needs this method for using the power to take action against too high returns of individual heat suppliers.
Furthermore, the increased maximum heat tariffs have led to questions from Dutch MPs during a technical briefing by ACM for the Dutch House of Representatives’ Standing Committee on Economic Affairs and Climate Policy on 9 February 2022. ACM has answered these questions in a letter to the Standing Committee.