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E.ON German units raise gas prices, RWE mute

German utility E.ON’s domestic units said on Tuesday they will increase gas prices to households by up to 15% as of August due to record oil prices, firing the first shots in a price increase round feared by consumers.

Major rival RWE said on Tuesday it had not yet decided on future prices. Natural gas, a rival to heating oil and used by over 40% of German households, in continental Europe is index-linked to the price of crude via long-term contracts with producer countries, such as Russia and Norway.

Germany imports 80% of its natural gas needs. North German unit E.ON Hanse said in a statement late on Monday it will raise prices for over 500,000 household customers by 15% from August 1, citing “drastically higher procurement prices.” “We know that this is an extreme burden for many of our customers,” said sales director Uwe Kolks. “But since heating oil prices have gone up by 58% since January, we can no longer put off the adjustment of the gas prices.” E.ON Hanse said that an average household might pay €200 ($307.2) more per year inclusive of taxes for gas.

The cost of a similar amount of heating oil rose by more than €500 between January 1007 and April 2008, it said. E.ON’s Mitte unit also said it will raise its gas prices for some 90,000 customers in central German states by 14%, and E.ON Avacon said it will raise prices for 83,000 households in Lower Saxony and Saxony-Anhalt state.

A spokesman for RWE Energy, which supplies customers in western Germany said while a hike in July could be ruled out, the company had not formulated a strategy. “We’ll see how the prices develop,” he said.

The looming price hikes have already caused fresh political debate about Germany’s import dependency and inflation rises, which have been exacerbated by high taxes and especially hit poorer segments of the population. Hundreds of local utility firms across the country and internet vendors are likely to have to match the increases by E.ON, whose E.ON Ruhrgas unit is the market leader in importing gas and selling it on to long distance shippers, local utilities and industrial consumers. (Reuters)