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EXPLAINED: How can households in Denmark postpone paying their energy bills?

A scheme allowing businesses and individual households to defer payments for excess electricity and gas bills, came into effect on November 1st. A similar scheme for heating bills starts on January 1st. Here's a look into how it works.

EXPLAINED: How can households in Denmark postpone paying their energy bills?
File photo of a bill. Photo: Ida Marie Odgaard/Ritzau Scanpix

What’s the aim of the scheme?

To help households and businesses from struggling with the increase in energy bills this year, the government has introduced a way to soften the increase.

From the 1st November, households and businesses can choose to ‘freeze’ (‘indefrysning’) part of their electricity and gas bills for 12 months, if the price is above a fixed limit. You will therefore still have to pay the part of the bill that is below this limit.

The scheme for freezing heating bills starts in January 2023.

How does it work?

If the price of your bill is above the ceiling price (‘prislof’), set according to the price in the 4th quarter of 2021, you can have the part of the bill that exceeds this price, frozen and pay the rest as usual.

Gas

The price ceiling for gas is the gas price before tariffs, taxes and VAT. This is 5.84 kroner per m3, which corresponds to a typical consumer price of 15.45 kroner per m3.

Electricity

The price ceiling for electricity,  before tariffs, taxes and VAT is 0.8 kroner per kWh, which is a consumer price of 2.18 kroner per kWh. This consumer price has been calculated before the upcoming reduction in electricity tax in the first six months of 2023.

District heating

Not all district heating companies have to offer the freezing scheme. If your district heating company is covered by the scheme, you will be able to freeze the part of your heating bill that exceeds 1.44 kroner per kWh. 

When do you have to pay the ‘frozen’ bill?

You pay your utility bill which is below the ceiling price as usual but you don’t have to pay the excess amount. 

The excess bill is frozen for 12 months, which is followed by another year, interest-free. So you have to start paying back the frozen amount two years after the scheme starts.

Customers can then choose whether to pay their energy company the full excess amount, or pay it over a period of four years. 

The interest rate is two percent per year, which accrues from the day after the energy bill is due, with one year interest-free. For businesses, the interest rate is 4.4 percent per year.

You have to tell your energy company how you are going to pay the money, no later than one month before the interest-free year expires. Otherwise, you will automatically be enrolled in the four-year instalment plan.

Customers can opt out of the scheme at any time during the process and settle the total debt straight away or over the four years. You can also opt back into the scheme after leaving. 

Energy companies may charge an administration fee for the entire duration of the scheme.

How do I sign up?

The scheme is voluntary, meaning bill payers choose whether to freeze payments. 

If your household pays the energy bill directly to an energy company, you are responsible for joining the scheme with your energy company.

You will be notified by your energy company when registration is open. The energy companies are obliged to inform their customers about the scheme.

If your household is not a direct customer of an electricity, gas or district heating company, for example you rent or are in an andelsforening, you cannot register directly with your energy company. It is the landlord or association who must register for the scheme and they are then responsible for applying it to your bills. But the scheme is voluntary. 

After you have signed up, the total frozen amount will appear on your energy bills – or in a separate letter together with your bill.

Denmark’s largest energy company, Andel Energi has opened its digital registration for the scheme.

Its registration fee is 50 kroner excluding VAT per registered electricity and gas agreement and an annual administration fee of 88 kroner excluding VAT. 

READ MORE: How do I check my Danish electricity plan and decide whether to change?

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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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