Municipal utilities in Germany provide the basic supply of electricity and gas. Many are now faced with a dilemma: If they adjust their tariffs to reflect gas prices, customers can no longer pay. If they don’t adapt, many municipal utilities are threatened with bankruptcy.

The Stadtwerke Bad Säckingen are saved. A month ago, the small town on the Upper Rhine in Baden-Württemberg made the headlines because the municipal utility ran into serious financial problems due to the gas crisis. A supplementary budget from the city and new debts of 13 million euros are now saving the public utilities.

A feat of strength that, according to the Baden-Württemberg City and Municipal Day, could soon threaten other municipalities as well. And not only in the federal state there are warning voices. “The pressure on the public utilities is increasing every day,” Helmut Dedy, chief executive of the German Association of Cities, told ZDF in July.

Stadtwerke are in a special position in Germany. They have to offer the basic service, i.e. tariffs that can be booked by any household that has no other gas supplier. The problem from the company’s point of view: The prices for the basic service must always be based on existing customers. As recently as April, the Frankfurt Regional Court ruled that basic suppliers such as municipal utilities were not allowed to charge higher tariffs for new customers than for existing customers.

Public utilities are also allowed to raise their prices – and they do so vigorously – but they are more restricted than other competitors. First, they must demonstrate that the price increase is for reasons beyond the company’s control, and second, any rate changes must be publicly announced six weeks in advance and customers must be notified by letter. This leads, for example, to the curious situation that many municipal utilities are currently not levying the gas levy from October, but only from November. There was not enough time to send out all the notifications in good time.

In normal times, the tariffs for basic services are usually more expensive for these reasons. In times of sharply rising gas prices, however, the public utilities have suddenly become a cheap alternative. The consumer advice center NRW already examined this last November for the 20 largest cities in the federal state. Result: “The price level of the basic suppliers is on average significantly cheaper than many other tariffs available on the market.”

That’s good for customers, but bad for the public utility company. After all, they have to buy the natural gas on the market at the currently extremely high prices, but pass it on cheaper. As a result, “many municipal utilities could slide into insolvency, and the supply to many households would no longer be secure,” warns Dedy.

The municipal associations are therefore demanding help from the federal government. So far, for example, municipal utilities have been exempt from the money from the gas surcharge. Federal Minister of Economics Robert Habeck (Greens) has not set up his own protective shield for them. He sees the local authorities as having an initial responsibility here. But they are often cash-strapped themselves and can often only grant aid such as Bad Säckingen with high new debts.

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But it is also true that not every municipal utility falls into financial difficulties through no fault of their own. Some just speculate. Bad Säckingen, for example, buys 30 percent of its natural gas in the short term on the world market instead of having long-term supply contracts with producers. In normal times this can be cheaper, but in a crisis it becomes a problem because the short-term prices are significantly higher. Municipal utilities that have previously purchased gas from Russia are also more in trouble than those that have always bought from Norway or the Netherlands.

In addition, costs can also be cross-financed within municipal utilities. Tübingen’s Lord Mayor Boris Palmer (Greens) recently explained on the Markus Lanz talk show on ZDF that his municipal utilities would earn a “golden nose” because they produced a comparatively large amount of electricity from renewable energies such as solar and wind power. Their production costs would not have increased, but the income from them would have “increased tenfold”.

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