Dusseldorf The energy discounter Stromio can no longer supply its customers. The nationwide operating electricity provider had to stop delivering to customers because of the drastic increase in energy prices that it has to pay in purchasing.
On Wednesday morning at midnight, the energy discounter’s contracts were terminated by its network operators. “In our control area, the balancing group contracts were terminated extraordinarily”, the network operator 50Hertz confirmed the Handelsblatt on request.
Customers do not have to fear that their electricity will be switched off: When the low-cost provider ends, the households affected automatically slip into the supply of the local and often more expensive basic supplier, which is often the municipal utilities.
But Stromio’s delivery stop shows how tense the situation of low-cost electricity providers is with the current very high energy prices. Neckermann Strom AG only had to file for bankruptcy on Monday. Other larger providers such as the green electricity supplier Enqu, Berla Energie, Smiling Green Energy and Lition Energie recently had to stop delivering to customers.
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The company’s business model no longer works in the EU-wide energy crisis: the prices for gas and electricity have climbed to record levels. “There is definitely a causal connection between the high gas prices and the high electricity prices on the exchange – due to the supply bottlenecks that we are currently experiencing on the gas markets,” said a spokesman for the transition network operator 50Hertz.
The price for one megawatt hour is currently over 200 euros. On Tuesday it even shot up to more than 500 euros in peak load on the European power exchange Epex-Spot. According to the comparison portal Verivox, electricity prices for private customers are expected to rise by seven percent next year.
With short-term electricity purchases, the new challengers were able to secure a price advantage over the established energy suppliers before the energy crisis. Your business model: make a bargain at the last second and supply your customers cheaply. Exploding energy prices on the spot market, i.e. the market where discounters buy energy at short notice, surprised the low-cost providers.
Low-cost discounters are in dire straits
Afterwards, the electricity suppliers only had two options: to increase the actually low prices extremely – or to terminate the supply contracts with their customers from one day to the next.
“The market will consolidate and we will not only see further delivery stops, but also bankruptcies,” explains Udo Sieverding, energy expert at the consumer center in North Rhine-Westphalia. In contrast to the basic suppliers, the business model of the discounters is based on several pillars: With lean sales and quick new customer acquisition – also with the risk of losing customers – the energy discounters have grown significantly in recent years.
“Ultimately, however, the low-cost providers also live from sluggish customers who change providers and rely on cheap prices in the long term,” explained Sieverding. Price increases and fluctuations were often not noticed by this type of customer.
The most important thing in the energy discounter’s business model, however, is procurement, explains the consumer advocate. Above all, the growth in new customers was covered by the fact that in the contractually agreed delivery time – often around twelve months – quantities of electricity were sold that had not yet been purchased at the time. For years, the companies have done well with the strategy.
“It works well for a while – especially with the falling prices that have existed for years,” says Sieverding. In that case, the business model of stocking up on cheap electricity and gas at a later point in time is definitely advantageous. “All the signals point to further price explosions – the providers should be up to their necks”, said Sieverding.
However, when prices rose slightly over the past two years, it became clear that the concept is by no means crisis-proof. In the event of strong fluctuations, the system of this procurement strategy collapses – especially because energy prices have increased explosively since September 2021.
“Then the corporations concerned go bankrupt or try to save themselves by stopping deliveries,” said Sieverding. A third possibility for the energy discounters to escape the ruinous contracts: They could aim to be thrown out of the balancing group. Because after this measure it is justified to terminate the customer relationships.
The balancing group contracts regulate the supply of the energy suppliers for the respective market area. If the low-cost provider cannot fulfill the obligations of the balancing group contract, it will be terminated. The courts would then have to decide how the chances of compensation are then and who has to pay.
Consumer advocate: “We will not only see delivery stops, but also further bankruptcies”
After this market adjustment, however, new energy discounters could re-establish themselves or old low-cost providers could return to the same business model: aggressive new customer acquisition and layoffs in bad times.
Since basic suppliers such as the local public utility company buy longer-term, it is possible for these providers to better compensate for price fluctuations. “As a rule, basic suppliers buy electricity every day over a period of several years – at favorable and unfavorable times,” explained Sieverding. They are better equipped against strong fluctuations by being able to average their prices.
But even the basic suppliers are not immune to rising energy prices in the long term. “If we should record such increased prices for another year, these will also put the municipal utilities in a mess,” said the consumer advocate.
The tight gas prices are currently causing major fluctuations on the electricity markets. But the development of the global economy, climate change, the corona crisis or global political conflicts such as the situation in Ukraine and the Middle East can have a massive impact on the price of energy.
How many customers are affected by the current delivery stop in the case of Stromio is so far unclear, reports the news agency dpa. The company from the Rhenish town of Kaarst informed the dpa in writing that it was not insolvent. In the middle of the heating season, a sister company of Stromio, the energy discounter Gas.de, had already stopped delivering at the beginning of December. The joint brand “Grünwelt Energie” from Stromio and Gas.de was also affected. Gas.de cited the current price explosion in energy purchasing as a reason.
Stromio and Gas.de have the same managing director and belong to the Dutch Callax group of companies through several intermediate companies.
More: Another energy supplier stops deliveries – what consumers need to know now