Danish consumers paid ’60 million kroner too much’ for energy

Around 600 companies who transport energy in Denmark have not been sufficiently checked for correct pricing, according to the Danish state auditor.

Danish consumers paid '60 million kroner too much' for energy
Gammel eltavle i hus fra trediverne - Radiatortermostater og andre installationer i hjemmet, Randers onsdag den 11. januar 2023.. (Foto: Bo Amstrup/Ritzau Scanpix)

Energy consumers in Denmark paid too much for the transport element of their energy bills over a number of years, state auditor Statsrevisorerne has concluded according to a report by broadcaster DR.

In a new report for Rigsrevisionen, Denmark’s national audit agency, the auditors criticise checks of 600 Danish energy companies undertaken by another agency, Forsyningstilsynet (Danish Utility Regulator).

The mandate of the utility regulator is to protect consumer interest in the utility sector, including by checking price levels of energy companies that have local monopolies on energy transportation to homes and businesses.

Regulation by Forsyningstilsynet between 2018 and 2021 resulted in companies being told to reduce their prices by a total of 60 million kroner, according to DR.

But the work was not rigorous enough according to the state auditors, which have concluded that it is “probable” that not all rule breaches were discovered and that therefore many cases in which consumers overpaid went undetected.

“The state auditors find it very unsatisfactory that a number of consumers have paid too much for transport of utilities and that there is a risk that this applies for several consumers for electricity, gas and heating alike,” they state in the criticism.

The regulator failed to strategically identify companies where the risk of rule breaches was greatest and to thereby focus scrutiny on those companies, according to the auditor.

That includes a lack of checks of heating transportation companies in particular, DR writes.

The chair of the state auditors, Conservative MP Mette Abildgaard, called the conclusions “very worthy of criticism”.

“This affects many Danish families which are fighting to pay their heating and electricity bills right now, and those bills could have been lower if the Danish Utility Regulator has conducted sufficient checks,” she said in a comment to DR.

“The Utility Regulator is independent but the minister [utilities minister Lars Aargaard, ed.] can therefore open a dialogue with the regulator – and law changes could be considered. At the state auditors we will have a meeting with the National Audit Agency where they will tell us how they will prepare their own checks,” Abildgaard said.

The minister is yet to comment on the issue, DR writes.

A total of 76 inspections were conducted by the Utility Regulator between 2018 and 2021, resulting in 34 irregularities being detected. That resulted in companies being ordered to refund customers on 22 occasions, DR reports. This is where the figure of 61 million kroner comes from – it is the amount that has already been paid back or ordered to be paid back by companies.

As such, the state auditors suspect Danish consumers may have overpaid in substantially more cases than the ones detected.

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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?