Your supplier’s invoice contains three components: Network charges, energy costs as well as taxes and levies.
In Luxembourg, the electricity network tariffs are the same for all consumers at the same voltage level, regardless of which network you are connected to and regardless of the choice of your supplier. Since the network operation is a regulated monopoly, it is up to the ILR to approve network tariffs, after a proposal by the network operators.
The increase in network costs for 2023 is mainly due to the increase of two cost items of the network operation.
On the one hand, Luxembourg forms a common electricity market area with Germany. Luxembourg thus contributes to the costs of the ancillary services that allow the transmission system operators in the common area to keep the frequency and voltage at the right level, to remove congestion on the transmission level and to keep the balance between generation and consumption, in particular through the provision and activation of network reserves and balancing services.
The cost of these measures, given the predicted increase in the number of interventions as well as for the price of the raw materials needed by the reserve power plants, in particular coal and natural gas, was estimated in autumn 2022 at almost 11 billion euros for the common market zone, of which a share of 129 million euros is expected to be covered by Luxembourgish tariffs in 2023 (compared to 15 million euros in 2022). Since these estimates are subject to uncertainties as to the level of prices and the required reserve quantities, the estimated costs for ancillary services at the expense of the transmission system operator are reevaluated in summer 2023 to 69 million euros, resulting in a partial alleviation of the tariff increase from 1st September 2023 on.
Secondly, every transmission of electricity causes network losses through heat emission, which the network operator must compensate for by purchasing electricity on the wholesale market. Considering the increase in wholesale market prices, the cost of compensating for network losses is estimated at 52 million euros in 2023 (compared to 10 million euros in 2022).
It is also worth noting that the state has implemented measures to stabilise the price of electricity for households on the level of 2022 prices. Thus, the law of 23rd December 2022 amending the amended law of 1st August 2007 on the organization of the electricity market allows the introduction of a negative contribution from the compensation mechanism for all electricity consumers with a yearly consumption of less than 25.000 kWh. This contribution is set by the Institute and will be modified on 1st September 2023, to keep electricity prices for the targeted consumers stable.