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Cheaper electricity on the way for 2.5 million Danish customers

Electricity customers in eastern parts of Denmark will soon see their bills reduced after energy grid operators agreed to reduce their tariffs from March 1st.

Cheaper electricity on the way for 2.5 million Danish customers
Some electricity grid operators in Denmark are to reduce tariffs and others may follow. File photo: Bo Amstrup/Ritzau Scanpix

Two energy grid companies, Cerius and Radius Elnet, are to reduce their tariffs from March 1st. The two companies operate on Zealand and the smaller islands Lolland, Falster and Møn.

Tariffs were increased at the turn of the year because the companies said they had a backlog of additional costs from last year that they wished to trim.

Money raised from tariffs goes toward the cost of maintaining the electric grid and transporting energy to consumers.

An electricity bill accounts for tariffs, the raw electricity price, VAT and other taxes.

The average tariff for customers in Radius’s area — Copenhagen, North Zealand and parts of Central Zealand — should drop by 18 percent from March, while the rest of Zealand will see their tariffs fall an average of 20 percent. 

READ ALSO: Danish regulator says  electricity companies earn ‘excessive’ profits

“It was very sad in the autumn when we had to announce price increases but with the sudden high increases to the cost of electricity, there was no way around it,” head of operations Cäthe Juul Bay-Smidt of Cerius and Radius Elnet said.

“But as we clearly said at the time, and as we have said since, we intended to reduce prices again as soon as we saw a longer-term trend towards lower prices. That’s what we’re seeing now,” she said.

“And that means we will have lower costs and then we can put our prices down,” she said.

As many as 2.5 million customers on Zealand, Lolland, Falster, Møn and outlying smaller islands could feel the benefit of the lower tariffs.

A third energy grid company, Trefor, is also reported to be considering reducing tariffs. Trefor operates in the trekantsområde or “triangle region” encompassing areas in and around the towns of Vejle, Kolding and Fredericia.

No final decision has been taken by Trefor so far.

“We have considerations about hopefully being able to reduce prices around the time of the summer holiday. I don’t expect to be able to do it earlier,” director of infrastructure Charles Nielsen told news wire Ritzau.

“That is because we have a relatively large debt from last year and previous years that must be cut back,” he said.

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COST OF LIVING

Danish national bank says wage increases will keep inflation high

Thousands of people who work in Denmark are set to receive wage increases under new collective bargaining agreements, but the flip side for private finances is a likely knock-on effect maintaining inflation.

Danish national bank says wage increases will keep inflation high

Wage increases given to people under the Danish labour system in 2023 and 2024 could help to keep inflation levels up, according to a new forecast by the Danish central bank, Nationalbanken, published on Tuesday.

The central bank publishes two forecasts each year for expected developments in the Danish economy.

“Inflation in Denmark is expected to come down significantly during 2023 as the inflation pressure driven by global conditions eases,” the bank stated.

“But that will be replaced by an inflation pressure driven by domestic circumstances resulting from higher wage increases,” it wrote in the forecast.

Collective bargaining agreements between employer confederations and trade unions this spring are likely to see wage increases for workers across sectors, due to higher living costs connected to inflation.

READ ALSO: Danish store workers get pay rise in new bargaining agreement 

Inflation is predicted to finish at 4 percent for the whole of 2023. That is lower than the inflation rate for the whole of 2022.

Next, inflation will reach 3.6 percent for the year according to the new forecast. This is higher than the figure given for 2024 in the previous forecast, which was 1.7 percent.

Core inflation or kerneinflation, a measure of inflation which does not account for the price of energy and raw food materials, is expected increase as a result of the wage rises.

The measure is predicted to end at 6.2 percent this year and 4.3 percent next year.

The central bank called for political measures to keep a rein on inflation.

“At the current time, Denmark and the eurozone have largely the same challenges in relation to bringing down inflation with an outlook of wage increases which are not compatible with stable, low inflation in the long term,” the bank writes.

“Potential new financial policy that increase capacity strain on the economy should, as a minimum, be responded to with measures that ease the strain in other areas,” it said.

The risk of inflation taking hold in a spiralling increase of prices and wages still exists, the central bank argues. As such, it advocates political intervention should the risk increase.

In such a spiral, higher wages result in higher costs for companies, which raise their prices, meaning consumers need renewed wage increases to maintain their purchasing power.

READ ALSO: Will falling inflation in Denmark mean lower living costs?

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