Netherlands

More citizens are getting into financial problems after new, extreme gas price rise

Two students in Rotterdam in their 1930s home. The house is not well insulated. Due to the current high energy bill, students have left the house.Statue Arie Kievit

Energy companies are noticing that citizens are finding it more and more difficult to pay the bill. ‘We have recently seen that direct debits fail more often,’ says an Eneco spokesperson. ‘The number of people in a collection process is also increasing.’

Because Russia is throttling the gas supply to Germany, the gas price on the trade market has risen from 90 euros in June to more than 200 euros now. Households will see this further increase on their monthly bill. Especially now that fewer and fewer Dutch people have a fixed energy contract, with usually much lower prices, large groups are having to deal with the new, much higher prices.

Eneco cannot say how much energy bills will rise if customers move from a permanent contract to a variable contract, because the amount depends on many factors, such as family composition and the degree to which a home is insulated. ‘But we notice that many customers who come out of a permanent contract are shocked by their new amount.’ Competitor Vattenfall recently announced The Financial Times know that an increase from 150 euros to 550 euros per month at the beginning of 2023 will not be exceptional.

Stress test energy prices

That high prices can become a problem for many households is apparent from a so-called stress test that the Central Planning Bureau conducted last June. It looked at how many Dutch people run into financial problems in two scenarios. In the first, energy prices are three times as high as at the beginning of 2021, in the second ‘dark’ scenario, the energy price is seven times as high.

Now that the gas price seems to have settled above 200 euros per megawatt hour, the dark scenario threatens to get closer and closer. The energy costs are then so high that more than 100 thousand households have an average shortfall of 500 euros per month. Supervisor ACM says it will soon be able to report how many households still have a fixed energy contract.

The increase in the gas price is not directly linked to the energy bill, because more factors play a role and some have a dampening effect, such as the recent VAT reduction. But, the planning office warns, it is not just about energy, the costs are also rising because food and clothing, for example, are becoming more expensive, although there is some lag effect.

A number of measures taken by the government only alleviate the problems to a limited extent or for a select group, such as the recent reduction in excise duty on fuel. Higher incomes mainly benefit from this, because they often drive more kilometers by car. The lowest incomes do benefit from the energy allowance.

Nevertheless, the heaviest blows fall ‘at the bottom’, as the CPB report reports. In economic headwinds, this group always has the hardest hit; that was the case with the pandemic.

Buffer Build Problems

People at the bottom of the income ladder often have no opportunity to build up a buffer because they have too little income. If it is possible to save or build up wealth at all, citizens on social assistance, for example, have to surrender their buffer. Or they don’t end up on welfare because they first have to eat up their reserves. As a result, they cannot absorb setbacks such as they are occurring now.

Dutch people with a higher income can survive on average for a year with their savings, according to the CPB study. Only then should this group drastically adjust its spending. The CPB therefore advocates measures that help the most vulnerable Dutch people in particular, such as increasing social assistance benefits and the minimum wage. People on benefits or allowances should also be enabled to build up financial buffers without their benefit being cut.

More citizens are getting into financial problems after new, extreme gas price rise
Source link More citizens are getting into financial problems after new, extreme gas price rise

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