“I chose a cheap tariff – and the annual bill was still a shock.” Here is how a German energy contract is built.
Two prices, one bill
Every tariff has a standing charge (Grundpreis) – fixed per month or year – and a unit price (Arbeitspreis) per kilowatt hour. Annual cost = standing charge + unit price × consumption, so compare the total for your consumption. The monthly instalment (Abschlag) is an advance payment; at least once a year (§ 40b EnWG) the annual bill settles actual consumption. It must arrive within six weeks of the billing period; credits must be offset or refunded within two weeks (§ 40c EnWG). An instalment set too low ends in a back payment.
Price guarantees: three kinds
According to the Federal Network Agency (1 April 2025), household electricity splits into about 40 % procurement, sales and margin, 28 % grid and metering charges and 32 % taxes, levies and surcharges; the industry association BDEW puts 2026 at 41/25/34 %. Gas also carries the CO2 price, in 2026 within 55 to 65 € per tonne.
| Guarantee | Covers | Does not cover |
|---|---|---|
| Energy price guarantee | energy share only | grid charges, taxes, levies |
| Limited price guarantee | energy share and usually grid charges | taxes, levies, surcharges |
| Full price guarantee | all components | usually only VAT changes |
Consumer advice centres found the limited version most common. Check what is guaranteed and for how long.
Term, renewal and special cancellation
For contracts since March 2022 (§ 309 No. 9 BGB): initial term at most two years; renewal only open-ended with one month’s notice; notice before the end of the initial term at most one month.
On a price increase, household customers must be informed at least one month ahead and may cancel without notice, effective when the increase takes effect (§ 41 (5) EnWG) – even if grid charges or levies are blamed (BGH, VIII ZR 163/16). Only a one-to-one VAT pass-through gives no such right (§ 41 (6) EnWG). The right lapses once the increase applies – open the supplier’s letters.
Bonus traps: a new-customer bonus is usually credited only with the first annual bill; what counts is the price from year two.
Basic supply or special contract
Doing nothing lands you with the basic supplier (Grundversorger) (§ 36 EnWG): cancellable with two weeks’ notice (§ 20 StromGVV), a safe fallback but usually the most expensive tariff – on average 44.93 ct/kWh against 38.20 ct/kWh elsewhere (Federal Network Agency, April 2025). Any other contract is a special contract. If your supplier fails, you fall into replacement supply (§ 38 EnWG) without interruption. Since 6 June 2025 a switch must be completed within 24 hours (§ 20a EnWG). Five myths: fact check on switching.
How to proceed
- From your last bill note consumption, standing charge, unit price, contract end and notice period.
- Read your meter at year end, at every price change and when switching, and report it.
- Compare the total for your consumption, deduct bonuses, look at year two.
- Take increase letters seriously – special cancellation until the effective date.
Prefer not to do this every year? That is what the electricity and gas check with my cooperation partner Elwira Bahr is for.
General information, not legal, tax or investment advice. Sources: German Energy Industry Act (§§ 20a, 36, 38, 40b, 40c, 41 EnWG), Civil Code (§ 309 No. 9 BGB), Electricity Basic Supply Ordinance (§ 20 StromGVV), Federal Network Agency (Monitoring Report 2025, consumer portal), BDEW (electricity price analysis August 2026), BGH ruling VIII ZR 163/16, consumer advice centres – as of October 2026. Prices are averages and vary regionally. Want to go through your contract together? Get in touch.
