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Fixed or variable price: Which electricity plan to choose in Denmark?

Fixed-price electricity contracts in Denmark are becoming more expensive due to high energy costs.

Fixed or variable price: Which electricity plan to choose in Denmark?
Customers in Denmark may be able to save on electricity bills by switching to a variable rate plan. File photo: Mads Claus Rasmussen/Ritzau Scanpix

Increasing rates on fixed-price energy contracts in Denmark are making variable rate contracts a more attractive option for many consumers.

While many people have adapted their energy habits to minimise bills – for example, by using appliances at night – that option is not available to people on fixed-price electricity contracts – fastprisaftaler in Danish.

Fixed price contracts set the energy price at a specified amount. This price then applies around the clock and remains set for a period of three months.

The fixed price has increased considerably as energy costs to consumers and businesses alike have risen in Denmark and the rest of Europe over the last year.

READ ALSO: EXPLAINED: What’s causing the highest inflation rate in Denmark for 40 years?

Nordlys and Andel Energi, two of Denmark’s largest energy suppliers, will charge double the rate for electricity for the last quarter of this year compared to Q4 in 2021, broadcaster DR reports.

The two companies have a combined customer total of around 1.8 million.

Customers with Norlys will pay around 4.98 kroner per kilowatt hour of electricity on the company’s ‘PuljeEl’ plan in October, November and December, DR writes.

A similar fixed plan with Andel Energi sets the price at 4.84 kroner per kilowatt hour on the company’s ‘BasisEnergi’ deal.

That is a higher price than customers are currently paying on variable (variabel) plans.

As of Monday, the variable rate is 3.30 kroner per kilowatt hour. The highest rate so far this year occurred in late August, when it reached 10 kroner per kilowatt hour.

“Customers who have PuljeEl had their price fixed in July, August and September. In those three months, we saw that the price of electricity increased continuously. But because customers had a fixed price they did not experience the ongoing price increases, but are now getting them in a single raise,” Norlys head of press communications Michelle Hald told DR.

When the company purchased or ‘reserved’ electricity for supply for the last quarter of 2022, the price was higher than it is now. That is reflected in the rate of the fixed plan.

“The new price is therefore the price at which we could buy electricity on the market in September, when we purchased for the fourth quarter,” Hald said.

Customers are currently likely to save money with variable contracts, according to consumer rights group Forbrugerrådet Tænk.

“Electricity prices swing enormously so I think you can get more out of adapting your consumption to when prices are cheaper,” the organisation’s senior economist Morten Bruun Pedersen told DR.

Variable electricity prices can be very low if, for examples, conditions such as windy weather increases turbine production and reduces the use of other fuels in electricity supply.

READ ALSO: Denmark’s gas stocks at full capacity as price drops

The drawback of variable rates is that they make it more difficult to plan an exact budget, Pedersen said.

“If you really need security and are willing to pay for it, then a fixed-rate deal can be a solution, I just think it might be an expensive solution,” he said.

Norlys told DR that customers who want to switch electricity plans can do so effective from the first day of the following month.

Customers should contact their own suppliers to find out what conditions apply to them.

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COST OF LIVING

Danish prices could leave ‘thousands’ of homeowners unable to pay bills

An analysis by an organisation representing Danish banks has concluded that the effects of inflation and high energy prices could leave thousands of people in Denmark struggling to pay bills in 2023.

Danish prices could leave 'thousands' of homeowners unable to pay bills

Increasing interest rates are a third factor that could makes bills harder to pay for many households next year, according to the analysis by banks’ interest organisation Finans Danmark, reported by broadcaster TV2.

Higher monthly overheads are set to continue in the foreseeable future, according to the analysis, in which Finans Danmark calculated expected disposable incomes for people living in Denmark in 2023.

According to the organisation, two in three families who own their own homes face extra costs of between 1,500 and 5,000 kroner per month.

Families with expensive heating systems – such as those in homes heated by individual gas heaters – could face paying between 2,500 and 6,000 kroner more each month.

READ ALSO: Danish Energy Agency advises homes with gas heating to conserve

Families most vulnerable to high energy bills and interest rates on their loans could pay as much as 4,500 to 9,500 kroner more per month. Around 120,000 families fit with this description, according to Finans Danmark.

“We are concerned. I don’t ever recall previously seeing a change to an outside circumstance, such as gas prices, which has eaten up so much money from Danish households,” the organisation’s CEO Ulrik Nødgaard told TV2.

Analysts have recently predicted that economic conditions will result in a higher number of people being out of work in Denmark next year.

“It’s obvious that when people are spending money on interest and gas that there is less money for other things, and demand in society will therefore fall, and subsequently something will happen to employment,” Nødgaard said.

Many families in Denmark will be able to cope with increased costs, however, he also said. That is because households will be able to fall back on savings in some cases.

The Finans Danmark CEO also told TV2 that there is a “need to consider targeted solutions in relation to helping the weakest,” in reference to the impact of high costs on people with the lowest incomes.

Banks are ready to help customers who are struggling, he said.

“We would basically like to help people through this. Banks have already reached out to their customers and said: ‘If you think things are looking difficult, pick up the phone and contact us, and we’ll find solutions,” he said.

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