Why is my electricity bill going up when energy prices are going down?

Energy markets have been particularly turbulent due to an unprecedented energy crisis following Russia’s invasion of Ukraine in February 2022.

For some time now, the Luxembourg media has been discussing an increase in electricity bills for Luxembourg households from 2025.

Many customers have since asked us about the reasons for this increase, when prices on the energy markets are following a downward trend after the considerable increases in 2022. We wanted to provide some background on this information.

What makes up the total amount of your electricity bill?

First of all, an electricity bill consists of several elements: the energy consumed, network usage costs (energy transmission and maintenance of the network manager’s infrastructure), as well as taxes and duties.

Before the energy crisis, the energy component represented only 43% of the total amount billed on average for residential customers. 40% of the costs were related to network access and use.

The remaining 17% was for taxes and fees.

Among these taxes and fees, in addition to the electricity tax and VAT, there was also a charge paid into the compensation mechanism. Set up by the State, the latter aims to encourage and subsidise renewable energy production and cogeneration projects as part of efforts to meet the climate challenge.

What happened during the 2022 energy crisis?

Following the outbreak of the conflict in Ukraine in 2022, energy prices on wholesale markets have skyrocketed. Faced with this unprecedented rise in prices on the energy markets, the Luxembourg State has adopted measures aimed at protecting households.

Electricity prices on the German market (year ahead)

A negative contribution was then introduced in the form of a compensation mechanism in order to stabilise prices for category A customers, meaning those whose annual electricity consumption does not exceed 25,000 kWh (i.e. the vast majority of Luxembourg households, and many professional customers).

Since January 1, 2023, this state contribution has made it possible to significantly reduce household bills, thereby helping to stabilise electricity supply costs at 2022 levels. Business customers whose annual consumption does not exceed 25,000 kWh also benefit from the scheme.

The energy crisis has not impacted Luxembourg households in terms of their electricity bills

The measures taken by the government have made it possible to avoid exposing households to significant increases in energy costs and network charges. According to the ILR [Luxembourg Institute of Regulation], in 2023, the average residential customer paid €201.3/MWh excluding VAT (i.e. €0.2013/kWh excluding VAT) for the integrated supply of electricity, compared to €202.9/MWh excluding VAT in 2022 and €198.8/MWh excluding VAT in 2021. The energy crisis has therefore so far had no impact on Luxembourg residential customers in terms of their electricity bill.

Enovos: a purchasing policy that protected consumers

The energy market has shown itself to be extremely volatile in recent years. Our long-term purchasing strategy allows us to cushion significant price fluctuations on the markets. This has the effect of protecting our customers against price hikes as well as softening the blow on our bills when the market is on the rise. Conversely, when market prices fall, the impact on our bills is also delayed.

Without this purchasing policy, electricity bills would have been much higher during this crisis.

Today, we can confirm that the “energy” component of your electricity bill will decrease from the end of 2024.

Then why is my bill increasing in January 2025?

While household electricity bills will indeed increase in 2025, this is mainly due to the adjustment of measures taken by the government at the height of the crisis to stabilise electricity costs for households.

As explained above, while Enovos customers’ energy component is indeed decreasing from December 2024, without returning to the levels experienced before the crisis, the State’s adaptation of its contribution to the compensation mechanism as well as the network costs will have an impact on the bills of the customers concerned.

Customers whose annual consumption exceeds 25,000 kWh will see their bills reduced because they were not eligible for state aid.

According to Statec estimates, if state intervention were to be completely eliminated, the increase to our overall electricity bills could be 60%. With regard to electricity, the government has, however, indicated its intention to maintain intervention with a view to covering half of this increase in costs for households in 2025.