What's at stake for your business
With electricity and gas, a supplier problem rarely remains solely a matter for the purchasing department. If energy has to be procured again at short notice, additional costs, extra financing requirements, and tight decision-making deadlines can all come into play. For a gas-dependent operation, process heat, steam, or drying are added to the mix: consumption can often only be reduced if production also decreases. The previous energy price crisis demonstrates how serious such burdens can become.
Unplanned additional costs
If the remaining quantity has to be procured at a higher price, the entire original price advantage can be lost.
Tied-up capital
Higher bills or required collateral tie up money that is then lacking for ongoing operations and investments.
Threatened margins
If additional costs cannot be passed on, the profit margin decreases. In extreme cases, production is no longer profitable.
Therefore, the price comparison should not end with the price in cents. Check what your company could financially bear in the event of a short-term new supply and what questions remain open about the supplier before concluding the contract.
What companies actually experienced in 2021 and 2022
The risks are not purely theoretical. At the time, short-term supply disruptions coincided with a market where energy prices had risen considerably. Simultaneously, many companies were under pressure due to rising costs and tight financing.
The contract was in effect. The deliveries ended.
At the end of 2021, suppliers abruptly halted deliveries; the problem worsened particularly in December. The Monopolies Commission documented the connection between sharply increased wholesale prices and long-term agreed customer prices. Affected customers urgently needed alternative supplies. Monopoly Commission, Policy Brief 9, February 2022, pp. 6–7.
Historical data confirms the market reaction. Which fallback supply applies to a business site depends, among other things, on its grid connection level.
Higher costs led to financial pressure.
- Companies surveyed with problematic financing situations
- 35 % → 41 %
- Early summer → Autumn 2022
- Companies surveyed with liquidity problems
- 17 %
- Autumn 2022
The supplier side was also affected: Among the energy suppliers surveyed, the proportion experiencing liquidity problems rose from 8 to 23 percent in the same comparison. DIHK Business Climate Survey Autumn 2022, pp. 10–12.
Self-disclosures regarding financing; no insolvency rates. The financial strain at that time had several causes, including energy, material, and financing costs. The figures do not measure the impact of supplier defaults alone.
What a difference of 13.86 cents can mean
The difference between average wholesale electricity prices in 2021 and 2022 is €138.60 per megawatt-hour, or 13.86 cents per kilowatt-hour. For one million kilowatt-hours consumed evenly across the hours of each respective year, this would represent €138,600 more for energy on the wholesale market. Basis: SMARD annual comparison for 2022.
Conversion of actual market averages, not a documented company invoice. Individual load profiles, contract hedging, network charges, and other price components are not included. A hedged operation was not automatically required to bear this increase to the same extent.
Contractual rights remain important. However, they do not replace the energy needed or the money a business has to raise for a more expensive new supply.
A documented extreme case: over one euro for electricity
For companies, the lesson lies in the process: Those who need to procure energy again at short notice may be comparing offers under completely different conditions than during the original contract negotiation. Which follow-up supply applies depends on the specific customer and network connection.
Gas: from low Corona prices to the energy crisis
A fair comparison uses the same market product. The Belgian regulatory authority CREG documents the range of monthly forward prices for the Dutch TTF: approximately €5–14/MWh in 2020, approximately €16–93/MWh in 2021, and approximately €81–236/MWh in 2022. Thus, the monthly prices in 2022 were in a different order of magnitude than in the COVID-19 year.
The colored sections show the lowest to highest monthly values per year, not annual averages or daily peak prices. Values are rounded by the source; common scale starts at zero.
Understand the market, product, and conversion.
TTF101: Arithmetic monthly average of the daily settlement prices of the "Dutch TTF Gas Base Load Futures" on the ICE Endex trading days in the month preceding the delivery month. This is a futures market reference for the following month, not a day-ahead spot price and not a German retail tariff. 1 €/MWh corresponds to 0.1 ct/kWh.
CREG, Study F2659 of 05.10.2023, p. 9, footnotes 5 and 6. The study deals with Belgian industrial customers; only the study's published TTF wholesale quotations are used here.
What actually reached the business depended on the procurement date and the contract. Those who had fixed prices for the longer term could enjoy temporary protection. Those who had to quickly replenish large quantities were immediately exposed to the changing price levels. The following gas tariffs are separate examples for end customers and do not belong in this market comparison chart.
Why gas was the greater risk for some businesses
Electricity keeps machines, cooling systems, and controls running. In many factories, gas provides the heat for the actual production process: for heating, drying, or generating steam. It is also used for heating and, in some cases, as a chemical feedstock. Destatis describes process heat as the most important industrial use of natural gas. Assessment by the Federal Statistical Office.
The quantity cannot be reduced arbitrarily.
A gas-fired furnace or steam boiler does not become electric simply by changing tariffs. Conversion can require different equipment, sufficient grid connection capacity, permits, and lead time. Where these prerequisites were lacking, gas remained indispensable in the short term.
The price affects value creation.
High gas consumption per product and fixed sales prices can put significant pressure on margins. Using less gas can then mean reduced production output, delayed deliveries, or even production downtime.
For such businesses, the gas price risk could significantly outweigh the electricity price risk. This is a company-specific assessment, not a general comparison of energy sources: Consumption, contract, cost share, and switchability are decisive. Even electricity-intensive processes can be existentially affected.
€315.90/MWh on the wholesale market
The Federal Network Agency cites this peak for the end of August 2022. This corresponds to 31.59 ct/kWh at the wholesale level alone. At the turn of the year, the value was again €63.80/MWh. The trend shows the range – not a fixed price paid by companies for the entire year. Federal Network Agency: Gas Supply 2022.
Gas remained available. Production was nevertheless reduced.
On July 27, 2022, BASF reported on the reduction of particularly gas-intensive production, such as in ammonia plants, where margins were not economically viable. At the same time, according to the company, its European sites were supplied with gas in accordance with demand. This demonstrates a production decision driven by economics, not a supplier failure or alternative supply at BASF. BASF, Half-Year Press Conference 2022, pp. 3–6.
The practical consequence: Evaluate commercial gas and operational heat demand separately. A guaranteed electricity price alone does not protect a gas-dependent production process.
How businesses suddenly had to buy expensive gas
As early as the end of 2021, before the price peaks of summer 2022, some deliveries ended abruptly. The grid connection remained in place, as did the need for heating or process heat. If the continued supply was no longer assigned to a specific delivery, the legally mandated substitute supply could apply to connections in the low-pressure network. A valid termination of the old contract was not equivalent to an already arranged new supply.
- Supply ceases
The previous supplier has stopped delivering. A new supplier has not been assigned.
- Basic service provider takes over
Where replacement supply applies, the continuing energy draw is covered.
- Quantities must be available
If the step-in supplier lacks the necessary hedging for these additional customers, it must purchase additional energy at short notice.
- The plant continues to consume
The need for heat and ongoing orders leaves little time for a changeover.
- Liquidity and margins are under pressure
A higher price meets a quantity that can hardly be reduced in the short term. This can far outweigh the original tariff advantage.
Stadtwerke Augsburg documented the procurement pressure in December 2021: Additional quantities of electricity and gas had to be purchased at high cost for newly acquired customers. At that time, they introduced a separate basic supply tariff for new customers. This is evidence of utility practice at the time, not an indication that this tariff separation would be permissible today. Stadtwerke Augsburg, reports from December 22, 2021 and January 27, 2022.
Gas replacement supply for non-household customers
Example for an annual consumption of 300,001 to 1,000,000 kWh in a low-pressure network:
- Net energy unit price
- 30.365 ct/kWh
- gross: 32.49 ct/kWh
- Base price net
- 326.76 €/year
- gross: €349.63/year
Gross price including 7% VAT at the time. Historical tariff example from Energieversorgung Sylt, not a nationwide average and not a current offer. The energy charge and basic charge are separate components. Original publication with customer group and price components.
Assuming a gas consumption of 100,000 kWh within one month, this energy charge would result in €30,365 net consumption-based costs, plus the basic charge calculated for the same period. This is a volume calculation using a published tariff, not a documented customer invoice. It illustrates why even prices significantly below one euro per kWh could place a considerable burden on a business.
It can cover the energy draw. However, it guarantees neither the old price nor profitable production. A physical gas shortage must be considered separately.
The risk has not disappeared.
We continue to operate in a market environment where this chain reaction can occur again. New price increases are meeting existing delivery commitments. Where procurement and financial reserves are insufficient, this can lead to renewed economic pressure.
Our assessment: The current signals give cause to question the reliability of a supply offer. The fact that gas is physically available does not yet answer the question of whether an individual supplier can economically fulfill its contracts.
How a price jump becomes a supplier risk
For example, problems arise when a supplier promises its customers a fixed price but intends to purchase a significant portion of the promised electricity or gas at a later date. If the purchase price rises sharply, these outstanding quantities can negatively impact the calculations.
- Firmly committed
The customer receives a longer-term price. The supplier thereby locks in its revenue.
- Still open
Part of the promised quantity has not yet been secured under suitable conditions.
- Purchased at a higher price
The market is rising. The unhedged quantity must now be procured at higher prices.
- Financially burdened
The profit margin shrinks or becomes negative. At the same time, the need for available funds may increase.
- New supply needed
If the funds are no longer sufficient and deliveries cease, the customer will need another supplier at short notice.
Rolling procurement is not inherently problematic. It spreads purchasing dates and can form part of a considered strategy. What matters is whether unhedged volumes, price commitments and financial reserves fit together. The label “discounter” alone also does not prove risky procurement. For gas, an upstream supply failure can trigger expensive replacement procurement even when volumes had already been contractually secured. Hedging therefore does not protect against every supply-chain risk.
Additional liquidity needs in energy trading can arise from collateral, i.e., money or other assets demanded by trading partners. In futures contracts, the effect depends on the position: rising prices typically burden sellers with daily settlement payments; buyers can receive cash inflows from this. Higher initial collateral requirements can also tie up funds. The ECB explains these liquidity risks in energy trading.
Related: Understanding the effects of payments when prices rise and fall →.
Our article Understanding Procurement Models shows how fixed prices, tranches and market-based procurement differ from the customer's perspective.
Why pressure is transmitted in electricity and gas
When supply ends, the company's energy needs don't disappear. For continued supply, the company needs another supplier to take over these needs and provide the appropriate quantities. If they haven't already made provisions for this, they will have to purchase energy under time pressure at the then-available terms.
This can lead to higher costs in the follow-up supply. The 2022 monitoring report by the Federal Network Agency and the Federal Cartel Office describes how default suppliers took over failed deliveries and had to procure additional energy at short notice. Source: Energy Monitoring Report 2022, sections on basic and substitute supply.
A supplier failure does not automatically generate additional physical consumption. It shifts procurement and the financial burden to other market participants. How strongly this affects prices also depends on market supply, hedging, and available liquidity.
At the end of the year, expiring contracts and operational approval deadlines can further increase the pressure to act. However, a supply interruption is not a risk limited to December. Reliable deadline management for energy contracts helps prepare decisions before time becomes a bottleneck. The basics of purchasing periods are explained in the sections on spot and futures markets.
What has proven successful with established suppliers
The takeover of affected customers by basic service providers demonstrates the value of efficient supply structures. For companies, therefore, in addition to the offer price, it is also crucial whether a provider can manage difficult market phases and reliably serve existing customers.
An established utility with sound procurement practices, sufficient financial resources, and a proven track record of contractual compliance can be particularly attractive for this decision. However, size, reputation, or municipal ownership do not replace due diligence. "Systemically important" describes a company's significance to the supply system; this does not imply a general insolvency or price guarantee for individual customer contracts.
The practical question is: What concrete evidence suggests that this provider can fulfill its commitments even under unfavorable market prices? Publicly available financial information, contract terms, and verifiable behavior during previous periods of stress are more helpful in this regard than a mere advertising promise.
Which supply is available – and at what price?
For electricity and gas, three questions must be answered separately: What is the customer's legal status? At what voltage or pressure level is the connection? And which supply or contract is assigned to the consumption?
Low voltage for electricity · Low pressure for gas
If the supply allocation is missing, Section 38 of the German Energy Industry Act (EnWG) generally applies to non-household customers as well. Substitute supply begins without a new contract being concluded. It ends with the commencement of supply under another contract, or at the latest after three months. Not every insolvency automatically terminates the supply. Section 38 EnWG and Explanation by the Federal Network Agency.
Basic service is not a general commercial tariff.
The statutory basic supply is aimed at household customers. This can also include professional, agricultural, or commercial self-consumption up to and including 10,000 kWh per year. Larger purely commercial consumption does not automatically fall under this entitlement simply because the local municipal utility steps in. Therefore, a follow-up contract is necessary in a timely manner after the regular contract expires; a permanently favorable basic supply is not a reliable fallback solution for such businesses. Definition of household customer in Section 3 of the German Energy Industry Act (EnWG), Basic supply according to Section 36 of the German Energy Industry Act (EnWG).
Medium voltage · Medium pressure · Higher network levels
The current transitional supply arrangement under Section 38a of the German Energy Industry Act (EnWG) requires an agreement between the grid operator and the default supplier. This agreement can also include connections at the low- to medium-voltage transformer, provided Section 38 does not apply. It is not automatically in place everywhere. It lasts a maximum of three months; if provision would be economically unreasonable, it may be excluded. Advance payments or collateral may also be required. This does not create a general entitlement to a supply for high-voltage or high-pressure applications.
Interval demand metering alone does not determine the right to substitute supply: The actual connection level is particularly decisive. Section 38a of the German Energy Industry Act (EnWG) and its requirements.
Then and now: do not equate the tariff rules
In 2022, the distinction between basic and substitute supply was redefined: Since July 29, substitute supply prices may be higher than basic supply prices. Since November 1, basic supply may no longer differentiate between existing and new customers based on their start date. Therefore, the current regulations cannot be retroactively applied unchanged to the beginning of 2022. Federal Network Agency: Entry into force of the amendments; the relevant sections for current cases are Sections 36 and 38 of the Energy Industry Act (EnWG).
Spot-market procurement is not automatically your tariff.
Statutory fallback energy supply
Published general prices apply. According to Section 38 of the German Energy Industry Act (EnWG), these prices can be adjusted on the 1st and 15th of each month. This does not result in an automatic daily one-to-one billing of every exchange price.
Specific supplier practice
Additional short-term purchases can increase the cost. The specific price list shows which cost items and prices apply. A market price alone does not constitute the complete delivery price.
Contract with index price
Here, an agreed formula determines the price, for example, a gas market index plus a service fee. The index, time period, volume weighting, and other costs must be specified in the offer.
A published example is the ZVB price list for gas replacement supply at medium pressure with power measurement, price level from January 1, 2025: It lists "Spotmarkt End of Day-THE," plus a service fee of 1.00 ct/kWh and a monthly basic charge of €50.00, both net. Network charges, other levies, fees, taxes, and VAT are added. This illustrates a specific price formula, not a standard legal formula and not a current tariff examined here. Original ZVB price list.
Upon receiving notification of a supply interruption: Confirm the end of supply and connection assignment with the supplier and network operator, secure the meter reading and correspondence, and request the applicable price list. Simultaneously, clarify the consumption volume for any necessary gas processes until a new supply begins. A contract or claims review does not replace these organizational steps. Information from the Federal Network Agency in case of supplier insolvency.
How to check hedging, liquidity and supplier quality before concluding a contract is explained in Part 2 with a specific supplier checklist.
When the price advantage is exhausted
In this example, a company needs one million kilowatt-hours of gas per year for its heating. It chooses an offer that is one cent per kilowatt-hour cheaper than a comparable offer. The planned savings amount to €10,000. If, later, 300,000 kilowatt-hours have to be procured at a price 10 cents higher than the originally agreed price, this will result in additional costs of €30,000.
What remains of the lower price?
- Planned price advantage in the year
- 10,000 €
- Additional costs of the new supply
- 30,000 €
In this example, the additional costs amount to €20,000 compared to the originally compared offer.
With a remaining quantity of 300,000 kWh, the planned advantage would already be consumed at an additional cost of around 3.33 ct/kWh.
Calculation method and assumptions
Price advantage = Annual consumption × Price difference ÷ 100. Additional costs = Annual consumption × Remaining share ÷ 100 × Additional price ÷ 100. Annual comparison = Additional costs less planned price advantage.
The calculation works for electricity and gas separately. For gas, the billed amount of energy is measured in kWh, not the metered volume in m³. The remaining share refers to the amount still needed for consumption, not the share of months remaining; heating gas is often highly seasonal.
The comparison offer is assumed to be unchanged and for continuous delivery. Both offers have the same quantities and other cost components. All values are net. Not included: damages, bad debt losses, additional fees, and processing costs. This example is neither a price forecast nor a statement about the probability of a supplier defaulting.
The calculation illustrates the relationship: A small advantage over the entire year can be outweighed by a larger price premium for a portion of the quantity. How to incorporate such variations into your planning is described in Planning Energy Budgets with Scenarios.
Six questions before signing a contract
- What is actually guaranteed? Check price components, duration, quantity regulations and possible adjustments.
- How verifiable is the economic resilience? Use available company information. A complete overview of a utility's procurement portfolio is usually not possible from the outside.
- How has the supplier treated existing customers? Pay attention to verifiable experiences with delivery, communication and contract processing.
- What advance payments do you make? High advance payments can increase the customer's financial risk. Compare payment methods and collateral.
- Who decides by when? Clarify responsibility, offer validity, contract end date and the timetable for a possible new supply.
- What type of supply is available at your location? Note the voltage level for electricity or pressure level for gas, contact person, and local connection regulations. For gas, also clarify which processes must continue and what technically proven alternative is available.
Prepare your offers based on the same criteria. Our Checklist for a reliable offer comparison helps to highlight differences.
Compare prices. Choose a supply.
A good electricity and gas offer suits the business and stands up to scrutiny. Where gas enables production, the required quantities, financial flexibility, and a reliable follow-up supply must all be discussed together. OPTUM supports you in reviewing consumption, contract terms, and the procurement model, and in clarifying any open questions before making a decision.
How reliable is your next energy offer?
Please bring your electricity and gas contracts, annual statements, and any new offers you may have. For gas, an overview of process heat, heating, and essential operational processes will also be helpful. We will discuss the scope of the price, delivery period, and any points that need to be clarified before finalizing the contract.
Discuss energy offer with OPTUM →For businesses: Electricity and gas. You can specify your requirements and contract status in the form.
