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CHAPTER 5

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Copenhagen, Denmark. Photo: Unsplash / Kate Chenkova

5. Denmark

5.1 Regulatory framework and organization of the market

5.1.1 Relevant authorities and actors

Several authorities have a role in regulating and overseeing the retail market for electricity. Going forward, we will describe these and the relevant regulations the authorities manage (Table 5‑1). Further, we will describe the Consumer Council's role as responsible for the public electricity price portal and as a public interest organisation for consumers.
Table 5‑1: Actors and relevant regulations
Role
Name
Responsibility
Regulatory authority
Danish Utility Regulator (DUR) / Forsyningstilsynet
The national regulatory authority in Denmark for the markets for electricity, natural gas and district heating. Responsible for monitoring and analyzing conditions in the utility sector with the purpose of securing consumer interests. Responsible for establishing and maintaining the electricity price guide, Elpris.dk.
Consumer authority and competition authority
Konkurrence- og Forbrugerstyrelsen (DCCA)
The primary tasks are to contribute to the development of new policies and regulations. Considers both competition and consumer aspects when analysing the market and putting forward recommendations to consumers and companies.
Consumer council
Forbrugerrådet Tænk
Works to secure and promote consumer rights and ensures that all consumers can make safe choices by strengthening consumers agency. Provides consultancy to customers regarding their rights as customers.
Electricity appeal board
Ankenævnet på Energiområdet
Handles complaints regarding the purchase and delivery of electricity, natural gas, district heating, and other associated commodities and services. Provides information regarding several topics for consumers and electricity retailers in the electricity market to prevent future complaints and provide broad information.
Industry organization for electricity retailers
Green Power Denmark
Work to ensure that Denmark is electrified with green electricity as soon as possible. Green Power Denmark has around 1 500 members, where around 36 are electricity suppliers. They have industry standards such as the Standard Agreement (“Standardaftalen”) which regulates cooperation between grid companies and electricity suppliers.

5.1.2 Regulatory framework

There are different acts and executive orders that apply to the electricity market in Denmark.

Retailer requirements

DataHub handles the communication and business processes between the market players in the electricity market. In order to communicate with DataHub, grid companies and energy suppliers are required to use a certificate. The certificate encrypts messages and verifies the sender’s identity when communicating with DataHub. There should be one certificate for testing and one for production. A certificate provider must be contacted in order to obtain a certificate.
Provisions in the Danish Electricity Supply Act and executive orders issued pursuant to this act transpose the requirements of the Electricity Directive regarding the legal and functional unbundling of vertically integrated Distribution System Operators (DSO). The unbundling requirements are applicable to vertically integrated DSOs with more than 100 000 connected customers. It is DUR that monitors the extent to which the DSOs comply with the rules.

Invoicing

The electricity suppliers are responsible for all communication with consumers due to the implementation of the supplier-centric model in the Danish electricity market. Executive Order no. 1696 of 2020 presents several requirements for the invoice. These requirements are: electricity consumption during the period, the product name, the customer’s take-up numbers or metre point ID for the delivery point, the date or expiry of the contract, information about the possibility and benefits of changing products or suppliers, a link to elpris.dk for customers with a consumption of up to 100 000 kWh, the name and contact details of the electricity supplier, information about the customer’s rights regarding dispute resolution and contact information to ANE, and a direct link to DEA’s website with information about the customer’s rights.
 The customer receives only one invoice from the electricity supplier. Customers can choose whether to receive the invoice every quarter or every month, and the payment can happen before and after the period.
The purpose of the executive order is to ensure transparency about prices, tariffs, discounts, reimbursement, and terms, as well as comparable invoicing information. Importantly, it must be ensured that the information is accurate, easy to understand, clear, concise, user-friendly and presented in a way that makes it easy for the customers to make comparisons. It applies to electricity supplier bills, invoices and invoice information for end customers.
DUR monitors electricity suppliers’ compliance with the legal requirements concerning billing information. Consumers can receive a simplified bill and a specified bill. They have the right to receive a specified bill free of charge; however, the simplified bill is intended to increase consumer awareness.

Contracts

It is free for the customer to change the electricity supplier and contract type as long as they don’t break a contract. The supplier obtains access to the customer’s data in the DataHub when a customer enters into a supply contract.15 The customer can enter into a contract with a new electricity supplier, and the previous supplier will automatically be notified by the new supplier.
The Electricity Supply Act (“Elleveringsbekendtgørelsen”) and the Consumer Con­tracts Act (“Forbrugeraftaleloven”) set many requirements for the electricity retailers’ information when entering into contracts with customers. Electricity suppliers have a maximum lock-in period of 6 months for households. For SME’s, there are no corresponding rules. It is possible with contracts with a longer lock in period, but the consumer can terminate the contract such that it ceases after 6 months. Generally, the consumer can terminate a contract with a notice of the current month plus one month. However, some electricity suppliers operate with shorter termination notice.
 The contract must include information regarding the customer’s right to withdraw. The customer has a 14-day right of withdrawal if the contract is concluded as a street sale, by telephone, or on the internet. Thus, the customer has a right to withdraw if the contract is a distance sale or entered into outside of the electricity supplier’s place of business. In addition, the contract must include information about where up-to-date applicable prices and fees can be obtained.
 Electricity suppliers must ensure that relevant and correct information about all of their products, including price and terms, is available at all times on their website. In addition, electricity suppliers are obligated to publish their current prices and their products on Elpris.dk. Thus, the suppliers are responsible for products and prices on Elpris.dk being updated.
The Electricity supply act (“Elleveringsbekendtgørelsen”) concerns the duties and legal obligations related to the supply of electricity to consumers, both for households and SME’s. It includes several legal obligations for electricity suppliers that are aimed at securing a number of fundamental consumer rights for electricity consumers. Among other things, the Executive Order contains specific requirements linked to the content of contracts that are related to the delivery of electricity, changes to the terms and conditions of the contract, and statutory requirements for advance notice prior to changes to contractual terms.
The Electricity Supply Act contains information regarding the approach of electricity suppliers in connection with changes in contracts. The electricity customer must be given prior notice of changes in the contract conditions from the electricity supplier, including price changes that are unfavourable to the customer. The notice must be at least three months for households and at least 14 days for SME’s. This notice should be clearly presented by either email, invoice, or similar individual communication. Changes in taxes, fees, and PSO do not have to be notified by the electricity supplier. If the customer does not accept the changes, it has the right to terminate the contract with effect from the entry into force of the change. The electricity supplier must also inform the customer of its right to terminate the contract.
 If the customer is notified about significant changes in the contract, it has the opportunity to terminate the contract.

Marketing

The Marketing Act regulates electricity suppliers marketing towards consumers and contains rules that implement EU directives. The requirements for marketing electricity contracts follow the general marketing regulations. The electricity supplier can market themselves as “cheaper” or "cheapest,"  but this should be correct and documented. If the electricity supplier compares their prices with the prices of other suppliers, the products should be identical.
There is a general ban on telephone sales in Denmark. This means that a salesperson may not call you without your consent. There are quite a few exceptions to this rule, but none of these apply to the electricity market. However, the ban on telephone sales does not apply to SME’s. It is therefore legal, among other things, for electricity suppliers to call SMEs, as the Consumer Contract Act does not apply to them. The rules can be found in § 4 and 5 of the Consumer Contract Act and § 5 of the Marketing Act, which deal with the prohibition of unsolicited contracts.
 According to the Consumer Contract Act, the consumer can withdraw a telephone agreement for up to 14 days after they have entered into it.
Winback strategies are allowed, but the electricity retailer must note that the customer must consent to the inquiry. The electricity retailer may not contact a former customer by electronic inquiry or telephone with the aim of winning the customer back without prior request. An electricity retailer may, without consent, contact the customer by physical letter with the name of the customer on it, unless the customer is registered on the so-called Robinson list or has announced that the customer does not wish to be contacted by the retailer. Without consent, the electricity retailer can also send a physical letter without a name attached, where the recipient of the letter is the “household” or the "resident," unless the household is registered in the so-called “No-Thanks Scheme”.

SME’s customer rights

The electricity supply regulation applies to both households and SMEs. However, as SMEs are not as exposed as households, some points apply to SMEs to a lesser degree. They are not equally protected when it comes to switching fees. SME’s can complain to the Danish Energy Supplies Complaint Board if their complaint is not significantly different from a complaint concerning a private customer.

Sanctioning

The Danish Energy Agency regulates the Danish electricity sector to ensure competition in the electricity market, ensure a high level of consumer protection, increase the use of renewable energy, and ensure that there is electricity in the socket at all times. The Energy Authority, DUR, supervises electricity retailers and can impose daily or weekly fines on the retailers as a coercive measure, unless a higher penalty is due under other legislation. If the electricity retailer grossly or repeatedly defaults on its obligations, DUR can inform the Minister for Climate, Energy, and Supply about this.
 Energinet can impose compulsory fines on the retailer to enforce actions that the retailer is required to carry out.
Regarding competition matters, the DCCA has the authority to impose sanctions on violations of the Competition Act. The sanction is based on the seriousness of the violation, its duration, and the retailer’s turnover.
 In the case of violations of consumer protection legislation that are punishable, the Consumer Ombudsman processed cases with a view to criminal sanctions.
In addition to fines and other sanctions, the retailer can also be deprived of the right to be registered at DataHub. If an electricity retailer fails to comply with an order, the Minister for Climate, Energy and Supply can deprive the electricity retailer of the right to be registered at DataHub. If the electricity retailer is deprived of the right to be registered at DataHub, their customers are transferred without delay to other electricity retailers by Energinet.

5.1.3 Government response to energy crisis

A number of political agreements were concluded in Denmark with the aim of addressing the challenges of the energy crisis and accelerating the transition to renewable energy sources. It was important for the Danish government to not interfere with the functioning of the market.

Subsidies to be distributed by municipalities to vulnerable households

The Danish government set aside a pool of DKK 100 million for municipalities in November 2021 to provide assistance to pensioners and vulnerable households affected by the energy price increases.

Energy payments to vulnerable households

In March 2022, the Danish government decided to provide one-time energy subsidies for households that both have a low income and one of the heat sources that has been particularly affected by extraordinary price increases in the heating season 2021-2022. The heat check was distributed to over 400 000 households at a value of DKK 6 000, for a total of DKK 2.4 billion. The heat check was the result of two political agreements concluded in February and March 2022 and a new law adopted in April 2022 called the Act on one-off subsidies for low-income households and heat sources covered by extraordinary price increases in the heating season 2021-2022.
On 14 September 2022, additional financial support for a number of disadvantaged citizens affected by the increasing energy prices was entered into force. Senior citizens were a part of the target group who would receive the first instalment of DKK 2 500 of the total DKK 5 000 in tax-free additional financial support from the end of September 2022. By mid-October, recipients of SU disability allowance or SU dependency allowance as single parents would receive a lump sum of DKK 2000 tax-free. At the beginning of 2023, recipients of retirement benefits would receive a lump sum of DKK 2000 tax-free.

National energy-saving-campaign

The DEA launched an energy-saving-campaign at the end of June 2022 with guidelines to help Danish consumers save energy. The campaign reached a wide range of customers with concrete saving advice to help them save energy. It also focused on how to save energy in the workplace, as this is an important part of energy saving. The DEA especially encouraged the workplace to follow six saving tips regarding different solutions to reduce electricity consumption.
 The energy saving campaign increased the knowledge of saving advice and contributed to significant electricity and heat savings.

Guarantee of DKK 100 billion to Danish electricity retailers

Denmark planned on 9 September 2022 to provide DKK 100 billion in guarantees to energy firms to ensure the necessary liquidity for companies facing major collateral requirements triggered by the high energy prices. The guarantee was specifically offered to energy companies with production facilities or responsibility for market balance, enabling them to borrow billions from the government to secure liquidity. As a result, these companies ended up having their best year ever in 2022, in stark contrast to facing bankruptcy without this guarantee. The guarantee scheme extended a safety net under the Danish electricity market, so that consumers could get the electricity that has been ordered.

Temporary and voluntary freezing schemes

A temporary and voluntary freeze scheme when it comes to expenditures on electricity, gas, and district heating was introduced by the Danish government on September 23, 2022. Both households and businesses had the opportunity to freeze the payment of part of the electricity bills for electricity and gas that exceeded the prices set in the fourth quarter of 2021.
The state provided loans to the energy companies equal to the amounts requested by customers to be frozen and guaranteed the frozen debt to the energy companies. The scheme is valid for 12 months, and the frozen amount is repaid to the energy companies for a period of 4 years after the 12 months. As the customers pay back the energy companies, the energy companies must repay the loan to the state.

Reduction of the electricity tax

The Danish government reduced the general electricity tax twice. The general electricity tax was reduced by EUR 0.5 kWh on October 1, 2022. In the first half of 2023, the general electricity tax was temporarily reduced to the EU’s minimum rate of EUR 0.11 kWh.  

5.2 Competitiveness and the functioning of the market

5.2.1 Competitive landscape

The liberalisation of the electricity retail market in 2003 allowed for competition among various electricity retailers in the market and made it possible for all Danish consumers to freely choose their electricity supplier. Since then, the competition in the electricity retail market has grown and become quite robust. Danish customers have beneficial prices, represented by a low margin between the electricity retail price and wholesale price. There are also several electricity retailers operating in the market, including established companies, local providers, and innovative companies. The market shares of the largest electricity suppliers are high, the market is characterizes by a few large electricity retailers and numerous smaller ones. The former regional monopolies are gradually losing market shares in their regional areas, but still hold high market shares in their regional areas. Statistics from the household survey indicate that the three largest electricity retailers (by market shares), account for more than half of the market, and the single largest retailer has a market share of 25 percent (Figure 5‑1). Using the results from our Danish household survey, we estimate the Herfindahl–Hirschman index of the retail market to be 1200, indicating low market concentration and a moderate to high degree of competition. The competition in the market for small and medium-sized businesses (SMEs) is similar to that of household customers.
Figure 5-1: Market shares of the ten largest retailers (Denmark) 
Note: The market shares are estimated from a survey conducted amongst Danish households in October and November of 2023. The shares are weighted. N=986. 
Currently, about 40 electricity retailers are active on the market, and barriers to entry can be considered rather low. The mandatory requirements for entering as a new retailer are., among other things, a certificate for testing and production, an agreement with a balancing responsible party and the relevant grid company, in addition, Energinet may demand a security deposit from electricity suppliers when there isn’t sufficient information for Energinet to assess whether the retailer will be able to pay for the services provided. As expected in a competitive market with low barriers to entry, there are instances of both entries and bankruptcies.
Some argue that low margins at the retail level work as a barrier to entry by making it challenging to invest in marketing, develop new products, and expand in the market. However, in general, low margins should be considered an indication of a competitive market where there is only room for new entrants that are more efficient than the active players. Some of the actors we interviewed have argued that margins are artificially low due to cross-subsidisation among previously vertically integrated entities. However, the explanation may also be that the previously integrated electricity retailers may be large and thus enjoy significant economies of scale, making them efficient. We have not investigated the hypothesis, but based on the available information, we consider it most likely that low margins are a result of ordinary rivalry in a market with low barriers to entry.
There are multiple choices of suppliers and products on the market. However, switching between electricity retailers has traditionally been somewhat low. One possible explanation may be that the potential gains from switching have been low relative to the cost and effort of switching, due to electricity making up a low share of consumers total energy consumption in combination with relatively competitive contracts. According to economic theory, the mere option to switch may, under some conditions, be sufficient to ensure competitive prices. If the willingness to switch is low for other reasons, it may, however, affect the functioning of the market adversely, as it will constitute a source of market power for active suppliers, a challenge for entrants looking to gain market share, and the expense of the supplier that exploits market power.
The number of switches did, however, increase during the energy crisis, according to actors we interviewed. DURs national report also shows that the switching rate increased by approximately 1 percent from 2021 to 2022.
 A large portion of the consumers who switched were customers who opted out of fixed-price agreements. This was typically done by the customers who entered into fixed price agreements in October 2022 whenelectricity prices were at an all-time high. Subsequently, when spot prices began to decline in November 2022, many customers with fixed-price contracts found their agreed prices to be significantly higher than the prevailing spot prices. Consequently, a considerable number of customers opted to exit their fixed-price agreements. Those with fixed price agreements were typically those who were less active before the crisis. Some actors we interviewed argue that the number of switches is likely to be further accelerated by the growing adoption of electric cars, making consumers more aware of electricity prices.
In addition, market dynamics are shifting, with various electricity retailers bundling the sale of electricity with other services to distinguish themselves and increase profits. These changes introduce complexity to the market, making it more difficult for consumers to compare different electricity retailers.

Impacts of energy crisis

The energy crisis did not result in bankruptcies for electricity retailers, but it posed a substantial threat, especially during the challenging winter months. This may indicate that the retail electricity market was indeed efficient. At the same time, the Danish electricity retailers were able to offer both fixed, variable, and spot price agreements during the crisis.
Electricity retailers had a significant number of customers on fixed price contracts when the price shock occurred during the energy crisis. It was a common hedging strategy before the crisis to hedge only half of their portfolio and leave the rest open in the market. Consequently, when prices surged dramatically, the fixed price contracts they had already sold to customers became exceptionally expensive as the electricity retailers had to buy the electricity at high prices and sell it at low prices. Thus, issues related to not having solid hedging strategies became obvious during the crisis. The challenge related to a lack of hedging was more substantial for smaller companies compared to electricity retailers that had traditionally been vertically integrated, as the smaller firms typically have less financial strength compared to the more established larger firms.
Another challenge electricity retailers faced as a result of the energy crisis was that consumers opted out of fixed price agreements. This issue was especially relevant when the market had record-high prices in October 2022, but just a few weeks later, in November 2022, prices plummeted significantly. The prices the consumers had in their fixed price agreements were substantially different than the spot prices in November 2022, causing an unexpected surge in customers opting out of their fixed price agreements. This presented a significant challenge for electricity retailers, as they had previously procured power to cover the fixed price agreements at historically high prices as a part of their hedging strategy. Consequently, many electricity retailers had to sell excess power back into the market at considerably lower rates.
Furthermore, the crisis brought a liquidity challenge for certain electricity retailers as the working capital requirements associated with many electricity retailers’ operations increased substantially. An actor expressed in an interview that many electricity retailers experienced the security requirements on NASDAQ to be ten times what they were before. This created a considerable strain on the many electricity retailers’ liquidity, and also restricted many companies ability to make further investments. The problem in this context was not necessarily tied to poor results but rather to cash flow limitations arising from the stringent security deposit requirements. Smaller retailers were typically more vulnerable than larger and more established electricity retailers. Consequently, many electricity retailers sought alternative routes, such as going bilateral through banks, which, although slightly more expensive in regard to interest rates. Ultimately, the core issue revolved around the substantial amount of cash required for security deposits and provisions to sustain essential operations, leading to cash flow challenges that pushed many companies to the brink of insolvency.
Many electricity retail companies also focused on product development and campaigns related to promoting energy savings for customers because of the energy crisis. These initiatives involved educating consumers on ways to optimise their energy consumption and reduce their energy bills through, for instance, national campaigns and webinars.
During the crisis, electricity retailers encountered a significant challenge due to an inadequate number of employees on their customer support teams to handle the overwhelming volume of phone calls. These calls ranged from customer complaints to inquiries about the billing details, reasons for specific charges, and requests for payment extensions. The high demand for customer support often resulted in prolonged wait times for callers. In some instances, if customers called just five minutes after the customer service phone lines opened, they were required to wait throughout the entire day before receiving a response due to the sheer volume of inquiries. This issue highlighted the strain placed on customer support resources during the energy crisis.
From our interviews, most market participants view that while prices have indeed surged, the market has continued to function. Note that price volatility in Denmark exceeds that of other Nordic countries due to stronger interconnections with continental Europe, particularly Germany, where electricity prices are higher and more volatile. The high prices do not imply market dysfunction; rather, they reflect market dynamics. Prices observed on Nordpool and passed directly on to consumers may not appear politically accepted or accepted by households as electricity prices traditionally have been relatively low and stable, but the actors we interviewed emphasised that it is essential to understand that this doesn't indicate a market failure.

5.2.2 Contracts and prices

The available contracts on the market cater to the requirements of the majority of consumers. According to our survey, 67 percent of respondents indicated that they could find at least one contract that aligned with their needs and preferences, while 27 percent did not know if the available contract types met their needs. For those who did find at least one relevant contract, 27 percent found just one, 25 percent found two or three, and 15 percent found more than three.
The most prevalent electricity contract amongst Danish households is a spot price contract. In the survey, 43 percent of respondents had a spot price contract (Figure 5‑2). The second most common contract type are fixed-price contracts. The fixed price contracts have a maximum duration of 3 months, while long-term fixed-price agreements are available for SMEs. Lastly, 15 percent have variable price contracts. A surprising 15 percent report not knowing which electricity contract they have.
Figure 5‑2: Contracts (Denmark)
Note: The contract shares are those reported by respondents in a survey conducted amongst Danish households in October and November of 2023. The shares are weighted. N=986. 
In the survey, we assessed households' awareness of the pricing details in their contracts. For spot price contracts, customers typically have an additional surcharge per kilowatt-hour (kWh), whereas in fixed or variable price contracts, this surcharge is typically integrated into the overall price structure. In addition to the surcharge, the majority of households probably pay a fixed monthly fee. In the survey, about 75 percent of households reported not knowing their surcharge, indicating a lack of awareness in this regard. This can also be related to the low switching activity in the market, making the households less active and thus less aware of the price elements in their contracts as they are not searching for other types of contracts or more competitive contracts. Of those who were aware of their surcharge, the most common answers were 1-5, 5-10 or 20-30 øre.
Figure 5‑3: Per kWh surcharge in spot price contracts (Denmark)
Note: Surcharge per kWh for respondents with a spot price contract. In Danish öre with 1 öre = 0.01 Danish kroner. Survey conducted in October and November of 2023 amongst Danish households. N=419.
For fixed price contracts, the spread of results tends to be more evident compared to spot prices due to how the customers enter into agreements at different entry times and that the agreements have different durations. In the survey, 20 percent of respondents reported a price range of 51-100 øre per kilowatt-hour (kWh), while around 15 percent fell within the 100-150 øre range. Additionally, 10 percent report prices as high as 150-200 øre. Surprisingly, approximately 50 percent of respondents express uncertainty about what their fixed price per kWh is, emphasising a lack of awareness in this regard. Household customers did, however, express a higher awareness of the price in their fixed price contracts compared to variable and spot price contracts.
Figure 5‑4: Per kWh price for fixed price contracts (Denmark)
Note: Price per kWh for respondents with a fixed price contract. In Danish öre with 1 öre = 0.01 Danish kroner. Survey conducted in October and November of 2023 amongst Danish households. N=211.
For variable price contracts, the spread of results from the respondents is similar to fixed price contracts. Approximately 20 percent of respondents in the survey have a price range of 51-100 øre per kilowatt-hour (kWh), while around 10 percent fall within the 100-150 øre range or 150-200 øre, respectively. There are also approximately 60 percent who do not know the price per kwh for variable price contracts. In the case of variable price contracts, the reason why there are so many customers who are not aware of their price is due to the customers entering the contract a while back. For the variable price contracts, the retail supplier sets a fixed price for a period of less than three months that can change with a warning beforehand based on the spot price development. It is therefore difficult to continuously know what the price of your current contract is unless you are an active customer. However, as variable price contracts are typically more expensive, it is likely that a majority of those who have entered a variable price contract are non-active customers who do not follow the development of the price of their variable price contact.
Figure 5‑5: Per kWh price for variable price contracts (Denmark)
Note: Price per kWh for respondents with a variable price contract. In Danish öre with 1 öre = 0.01 Danish kroner. Survey conducted in October and November of 2023 amongst Danish households. N=152.

5.2.3 Impacts of energy crisis

Availability of fixed price contracts, or contracts with fixed priced elements

There are various contract types available in the Danish market, including spot price agreements, quarter wise fixed price agreements for households, and long-term fixed price contracts for SMEs. SMEs also have combinations of both spot and fixed price arrangements.
Spot price agreements are available to both households and SMEs. Approximately 50% of consumers opt for such agreements, an increase from before the energy crisis, according to actors we interviewed. Many customers prefer spot price contracts that allow them to adjust their consumption to the hourly fluctuations in the market. In Denmark, the Consumer Council advises that if you have substantial energy consumption and are willing to adjust your usage patterns, having a spot price contract can lead to long-term savings. While authorities recommend reducing electricity consumption in general, they do not specify which electricity contracts to choose. Combination products are also available at the market, offering a blend of both fixed and variable pricing options. These products are typically 50 percent spot and 50 percent fixed price. This type of agreement functions as a hedging strategy for both electricity retailers and customers.
Fixed price agreements valid for a three month period (quarter agreements) are in high demand in Denmark. These agreements are available for both households and SMEs. These contracts may include certain volume thresholds, transitioning to a more expensive product if exceeded. There are challenges in the market in supplying long term fixed price agreements, especially for households. The legal framework strongly favours consumer rights, particularly with regards totheir ability to opt out of fixed price agreements. While this approach is undoubtedly consumer friendly, it can act as a disincentive for electricity retailers to provide favourable and long-term fixed price contracts. This is because the risk of procuring power for fixed-price contracts and engaging in hedging strategies is elevated when consumers have the freedom to terminate their contracts at any time. The existing quarter wise fixed price contracts can also be restrictive due to how the opt-out option forces the electricity retailers to charge a significant premium, especially if the market is volatile. The risk premium increases as there isgreater variation in prices, which is reflected in the prices towards consumers. Another challenge lies in the high costs associated with hedging on NASDAQ due to the substantial security deposit requirements, which can strain the financial resources of electricity retailers. However, long-term fixed price agreements existed for households before the crisis and may reappear when the market ‘stabilises’ again. Offering favourable fixed-price contracts is, however, a remaining challenge post crisis, as long as customers retain the option to opt out, necessitating electricity retailers to impose a higher risk premium. A scenario where opting out wouldn't impact the risk premium is if electricity prices remain stable, and thus result in low hedging costs for electricity retailers. However, there is no assurance that future electricity prices will not remain volatile, particularly with the introduction of more unpredictable renewable energy sources into the European electricity market.
The market participants believe the design of contracts could be market-driven. There is a continuous development of new products on the market, but these are not experiencing a rise in popularity. It is spot prices and quarterly fixed price agreements that dominate the market. Several market actors that were interviewed expressed that consumers seem increasingly to be able to adjust their energy consumption to the pricing during the day. However, fixed-price agreements may stay popular as the forward prices in the market are declining.

5.3 Customer awareness and satisfaction

The most important source of heating is an important factor when considering customer awareness and satisfaction. The survey shows that district heating is the most important source of heating for households in Denmark (Figure 5‑6). Electricity as a source of heating in the household is only 6 percent, and most of the respondents say that they either have a low electricity consumption per year or don’t know their electricity consumption (Figure 5‑7). The price paid for district heating is not affected by the development of electricity prices.
Figure 5‑6: Most important source of heating (Denmark)
Note: The graph shows the most important source of heating in the household. Survey conducted in October and November 2023 amongst Danish households. N=1299.
Figure 5‑7: Household electricity consumption per year (Denmark)
Note: The graph the reported yearly electricity consumption. Survey conducted in October and November 2023 amongst Danish households. N=986.

5.3.1 Awareness during search and switching

The graph in Figure 5‑8 illustrates that 45 percent of respondents have engaged in either switching or comparing electricity contracts in the preceding 12 months. This suggests that Danish consumers are for the most part active, especially with rising prices, which supports the notion that the Danish electricity retail market is well-functioning.
Figure 5‑8: Share of consumers active in the electricity market last 12 months (Denmark)
Note: The graph the reported yearly electricity consumption. Survey conducted in October and November 2023 amongst Danish households. N=986.
The respondents were asked about issues related to comparing and switching contracts in the survey. This includes challenges related to comparing or switching contracts, if the respondents felt well informed, and other relevant issues related to the process of comparing and switching contracts. The respondents who reported facing challenges when switching or comparing contracts had one or multiple reasons for the difficulties they encountered. The results emphasised two main challenges: the complexity of comparing contract terms and the difficulty in distinguishing between various contracts. Additionally, understanding the terms and conditions posed a significant challenge. Respondents also mentioned struggling to find information.
Figure 5‑9: Challenges in switching or comparing contracts (Denmark)
Note: The graph shows the percentage of respondents who have recently switched or compared contracts that experienced challenges when doing so. Multiple choices were allowed. Survey conducted in October and November 2023 amongst Danish households. N=294.
Among the respondents, approximately 40 percent reported feeling well-informed, while 20 percent felt somewhat informed when it came to switching or comparing contracts. Conversely, less than 10 percent expressed feeling poorly informed in these situations. These results may appear somewhat surprising, considering that a significant portion of respondents reported challenges in differentiating between contracts, comparing contract terms, and comprehending terms and conditions. This may suggest that the respondents are able to grasp the necessary information to make an informed decision, but the process may be unnecessarily difficult and time-consuming.
Figure 5‑10: How informed respondents felt when switching or comparing contracts (Denmark)
Note: The graph shows how well-informed respondents who have recently switched or compared contracts felt. Survey conducted in October and November of 2023 amongst Danish households. N=294.
Half of the respondents who have compared contracts ultimately chose not to switch contracts. While these individuals mentioned various reasons for their decision, the majority (50 percent) stated that the primary reason was the lack of considerable savings associated with switching. This can be related to electricity not being an important source of heating, such that changes to the electricity contract will be of little importance for the customer’s personal finances. In addition, the survey results indicate that customers don’t know the price elements of their contracts, which may suggest that they lack an understanding of what they can potentially save by switching contracts. Furthermore, approximately 20 percent of the respondents chose not to switch due to the lack of reliable information and that it was hard to compare contracts. (Figure 5‑11). Lastly, 15 percent of the respondents said that the reason for not switching was the perceived risk of switching relative to potential savings. This suggests that the primary driver for switching is the offered price, and the challenge of discerning whether a switch would lead to cost savings serves as a notable barrier.
Figure 5‑11: Reason for not switching after comparing contracts (Denmark)
Note: The graph shows why those who have compared but not switched contract, ultimately chose not to switch. Survey conducted in October and November of 2023 amongst Danish households. N=149.
The Danish market has traditionally not been characterised by high mobility. The switching rate has, however, increased due to rising electricity costs during the energy crisis. Consumers refrain from switching and comparing contracts for different reasons. The survey results show that the primary reason is the high level of satisfaction with existing contracts (Figure 5‑12). The second most prevalent reason is the perception of limited potential for savings in a new contract. Other reasons mentioned were that the switching process seemed both complicated and time-consuming, and that it was hard to find information on contracts and sellers.
This suggests that there is a perception in the market that switching is difficult and/or there is little to gain. Consequently, customers remain inactive which can pose a problem, especially for those who are less active, as they may end up with unfavourable contracts.
As shown in the survey, approximately half of individuals who refrain from switching or comparing contracts attribute this decision to the perceived complexity and time-consuming nature of the process, which is often related to difficulties in finding reliable information. Simultaneously, a significant portion believes that the potential for savings is minimal, whereas saving money is the primary motivation for switching. This dual challenge acts as a strong disincentive for consumers, discouraging them from engaging in the process of switching or comparing contracts.
Figure 5‑12: Reason for not switching or comparing contracts more often or at all (Denmark. Multiple choices allowed)
Note: The graph shows why those who have not compared or switched contracts within the last 13 months, have not done so more often. Survey conducted in October and November of 2023 amongst Danish households. N=490.
Approximately 40 percent of those who have switched contracts did this because they were contacted by a seller, while 20 percent did so because they were moving. Approximately 10 percent of the respondents report that they switched contracts because they were actively seeking a new contract. This may indicate that, despite 45 percent of customers being active, the majority is not actively seeking a more competitive contract but rather accepting an offer when being contacted. This does not necessarily promote a well-functioning market, as the “active” customers do not search for more competitive contracts. Furthermore, when consumers are approached by sellers, they may be led into contracts that are not in their best interest – especially if they are not well informed about their current contract.
Win-back strategy is also a strategy some electricity retailers use, with 27 percent of consumers reporting in the survey that they were contacted by their previous supplier after switching to a new one (N=180). Among these, 23 percent accepted their former supplier's offer. This may be due to the limitations in the current regulatory and legal framework stating that electricity retailers must have consent from the customer in order to use a win-back strategy.
Figure 5‑13: Context for switching contract (Denmark)
Note: The graph shows the context for having switched contract. Survey conducted in October and November of 2023 amongst Danish households. N=294.
The survey reveals that the main motivation for switching among those who already have switched contacts, is that the new contract offers a better price (Figure 5‑14). This is in line with how 50 percent of the households in the survey responded that the reason for not switching was that there was little money to save (Figure 5‑11). Overall, this indicates that consumers are drawn to low prices, giving suppliers an incentive to compete for price. Among other reasons, a little under 10 percent reported access to new services as a motivation for switching.
Figure 5‑14: Main motivation for switching (Denmark)
Note: The graph shows the respondents main motivation for having switched contract. Asked to those who reported having switched contracts within last 12 months. Survey conducted in October and November of 2023 amongst Danish households. N=294.
The most important source of information the respondent used the last time they switched contracts were ‘others’. If we view these results in connection with the customers main context for switching, it may seem like the most important source of information when switching contracts was the information provided when contracted by the seller. The second main source of information when switching contracts was internet searches, followed by recommendations and an online comparison tool.
The most important source of information the respondent used the last time they compared contracts were an online comparison tool, followed by internet searches (Figure 5‑15).  This may imply that a large share of the customers who are active, not due to being contacted by a seller, use the online comparison tool. However, since a much lower share actually switch contract due to the online comparison tool it may indicate that the customer is satisfied with their current contract. Hence, these results from the survey do not explain whether the online comparison tool is well functioning or not.
Of those who didn’t switch or compare contracts during the last 12 months, 24% reported it to be likely that they would use an online comparison tool if they were to compare contracts in the future. On the other hand, on the same question a surprisingly high share (53%) reported that they were not familiar with any online comparison site.
Figure 5‑15: Most important source of information when switching or comparing contracts (Denmark)
Note: The graph shows the most important source of information the last time the respondent switched or compared contracts. Survey conducted in October and November of 2023 amongst Danish households. Switched contracts: N=200. Compared contracts: N=149.

5.3.2 Customer awareness and demand for different contracts

There are three main contract types available in Denmark: spot price, fixed price, and some combination contracts. Both households and SMEs are offered these contract types. Fixed price contracts are historically the most used contract type, but the interest in spot price contracts has increased with the energy crisis. The demand for different types of contracts changes over time. Fixed price contracts were more attractive before the energy crisis, while spot price contacts have become more attractive after the energy crisis. Thus, fixed price contracts may become more attractive again when prices are falling.
The fixed price contacts in Denmark are contracts that last for a minimum of three months, where the price is calculated from the previous three months. The Danish consumer protection law states that a retailer can obligate a customer to buy a new product for a maximum of six months. However, not all electricity retailers use this as a term in their contracts, so the customer can opt out whenever they want. Fixed price contracts exist, but because the customer can opt out, the electricity retailers need to have a large premium. Prices could be better for the customer if there were binding periods such that the retailer didn’t need the premium. However, only households can opt out of the contract, as private consumers are protected on a different level than SMEs.
A lot of customers have maintained their fixed price contracts, but the supply of new fixed price contracts is limited due to a lack of incentives. The energy crisis led to the electricity retailers not offering fixed price contracts to households and SMEs, as these were not feasible for the retailers due to the uncertainty of the purchase prices. Thus, it is difficult to explain the demand forfixed price contracts. Spot price contracts have become more attractive after the energy crisis, as this product allows the customer to reduce their use of energy by shifting usage to off-peak times during the day.
Forbrugerrådet Tænk has advised the customers to have a spot price contract if they use a lot of electricity and can move their consumption to off-peak times during the day to save money in the long run.
 They have therefore recommended that the customers reduce their use of electricity, but not specific contract types they should choose. The customer only pays for their actual consumption with spot price contracts, which contrasts with fixed price contracts where the customer prepays. Spot price contracts are more attractive for customers that have electric vehicles, as the customer only pays for their actual consumption and can move consumption to off-peak times during the day.
The combination contracts are not as widespread as the other contract types and were mainly made as a reaction to the energy crisis. These combination contracts can, for example, be a mix of a spot price and a maximum price or include combination products such as heat pumps. The combination contracts with a spot price and a maximum price are costly for the customer as there is a price protection at the maximum price.
The interviewed market actors state that customers in Denmark have little interest and are generally poorly informed about the electricity market. Many customers in Denmark are not aware of the terms in the contracts orwhich retailer they have contracts with. The lack of information makes it complicated for the customer to consider what type of product they are buying. Several actors in the interviews state that the price portal is not well functioning as the prices in the portal do not reflect the real prices. Electricity retailers report incorrectly on the price portal, which makes it impossible to review prices and products.
 This is related to the fact that electricity retailers can adjust their products so that they are ranked higher without having the best product, and some do not provide true information on their products. The online comparison tool was the most important source of information that the respondent used the last time they compared contracts, but it was not the most important source for information of the respondents who actually switched contacts. Some of the interviewed actors would also advise the customer not to use the price portal.
Most customers understand their contract if they read it, but the electricity bill is more complicated to understand. Both the consumer council and electricity retailers explained that the customers do not understand their contract and which elements in the bill they can affect, which therefore makes transparency important. Some of the electricity retailers stated that there is too much information on the bill, which is not always in the best way for the customer. They don’t understand what different electricity retailers can provide; some electricity retailers in Denmark have dynamic prices that follow Nord Pool, while others have fixed prices. In addition, they don’t understand the difference of price, tariffs, and fees. There is Danish legislation on how the invoice should be made, but electricity retailers can do this in various ways. The customers can choose between a simple and a detailed invoice. It is, however, costly for the retailer to send the detailed invoice. In addition, the electricity retailers are free to add a cover letter to the invoice, explaining the main features of the more complicated information in the actual invoice.

5.3.3 Invoicing and billing

Figure 5‑16: How electricity bill is received (Denmark)
Note: The graph shows how respondents receive the bill from their electricity supplier. Survey conducted in October and November of 2023 amongst Danish households. N=986.
Almost all respondents report that they receive their electricity bill electronically (Figure 5‑16). Among the respondents seeking information on their electricity bills, three specific aspects of the invoice were highlighted (Figure 5‑17).  75 percent were interested in the amount to be paid, while 40 percent of respondents indicated that they were specifically interested in information regarding their estimated early and/or historical consumption. Subsequently, 35 percent were interested in their cost-breakdown, and approximately 25 percent were interested in information that may affect their electricity price.
Figure 5‑17: What information respondents read on their invoice (Denmark. Multiple choices allowed)
Note: The graph shows the fraction of respondents that report looking for each type of information on their bill. Multiple choices allowed. Survey conducted in October and November of 2023 amongst Danish households. N=986.
For 80 percent of the respondents, the preferred method of receiving notifications about changes to the electricity contract or other relevant aspects is through email. This was followed by a variety of different methods, such as text message or separate letter (Figure 5‑18).
Figure 5‑18: Preferred method of being notified of changes to the electricity contract or other aspects that may affect the customer (Denmark. Multiple choices allowed)
Note: The graph shows the methods by which respondents prefer to be notified of changes by the electricity seller that may affect the customer, for example changes to the electricity contract. Survey conducted in October and November of 2023 amongst Danish households. N=986.

5.3.4 Customer satisfaction

The retail market in Denmark is characterised by being complex, which is problematic for customers. Thus, there is a focus on how to heighten transparency for customers. The customers in Denmark generally did not care about the electricity market before the energy crisis. The increasing prices caused concerns for the customers, which changed their view of the market from indifferent to negative. Customers can complain to a private appeal board, where it costs 160 Danish kroners for the customer to complain, so that the customer avoids going to court. The Energy Supplies Complaint Board received 428 complaints in 2022, which is an increase of 130 percent compared with 2021. 341 of these complaints were related to the electricity market, which is also an increase of 130 percent compared to 2021.
 Customers are therefore less satisfied than before since their interest in the market has increased due to the energy crisis.
247 of the 431 complaints related to the electricity market were closed by the Complaint Board. Around 45 percent of the complaints were related to complaints regarding the bill and consumption. 11 percent were related to telephone sales, and 30 percent were related to other complaints.35 The result from the survey also shows that respondents negative experiences with electricity retailers were related to the bill and price. The Complaint Boards hotline also experienced an increasing number of inquiries, with 1 400 inquiries in 2022, which is an increase of 81 percent compared to 2021. 2022 was a year characterised by a great focus on energy bills. At the same time, it was also a year in which customers sometimes experienced difficulty getting through to the energy companies.35 Some of the actors in the interviews also commented on the customers having difficulty getting through to the energy companies. 
The customers have not been satisfied with the electricity retailers in the period where the prices have fluctuated. However, one of the interviewed actors explains that there is a misunderstanding that the electricity retailers have earned a lot of money on the back of their customers, which shows the customers lack of insight in the electricity market. There were some electricity retailers that ended up having their best year ever in 2022 due to the guarantee offered by the Danish state to the energy sector, but this was not on the back of the customers. Another actor thinks that there is a huge challenge to regain trust.
The customers can change retailers from day to day and can do this by contacting a new retailer, and this retailer has to contact the old one. However, the customers trust in the market is generally low. It was mentioned in our interviews that customers do not dare to switch retailers, which leads to poorly functioning competition and a higher electricity price for customers.
The complaints from the customers increased as the price of electricity increased. Typical complaints from consumers regarding fixed price contracts were that the electricity retailers stopped offering these contracts as they were not beneficial to them.
  • There have been some problems in Denmark with electricity retailers not following the law the way they should.
  • There has been a problem with smaller electricity retailers calling customers and luring them into bad contracts. This is also something that is worsening trust in the market.
  • A lot of customers think that they have fixed price contracts for a longer period than the usual three month period, and suddenly get a higher price. Changes in prices should be notified three months ahead. The notification of customers has been a mixed experience for customers.
  • There are examples of contracts with a low price for three months, and then the customer gets a more expensive contract later. The customer has in some cases been notified about changes, but in other cases they have been given no notice.
  • There have been problems with introductory offers where the customer is moved to a contract that is more expensive without being notified. There have also been problems with telephone calls where the electricity retailers promise a price they don’t actually offer.
  • There are some aggressive marketing strategies that result in a poor customer experience.
Approximately 45 percent of the respondents report having negative experiences with the retail supplier, and 35 percent report negative experiences not related to the price. However, many of the respondents report that there is little to save by switching, which can be related to customers having little interest in the market due to electricity not being an important source of heating. According to the survey, the main problem for the customer was that the price was much higher than expected and that the bill was hard to understand (Figure 5‑19). Identifying the origin of dissatisfaction with price development proves challenging. Some discontent may stem from abrupt spikes in electricity prices, while other sources of dissatisfaction may arise when electricity retailers shift customers to more expensive contracts. The bill being difficult to understand seems, however, to be a general issue in the market, indicating an opportunity for improvement in making this aspect more consumer friendly. Other problems mentioned were related to difficulty in reaching customer service, terms being different than expected, or prices being higher than agreed. Negative experiences with customer service emerged as a significant issue during the energy crisis, primarily stemming from a mismatch between the number of complaints and the capacity of customer service employees, resulting in prolonged wait times.
Figure 5‑19: Negative experiences with electricity seller (Denmark. Multiple choices allowed)
Note: The graph shows the fraction of respondents that reports a negative experience with their electricity provider during the last two years. Multiple choices allowed. Survey conducted in October and November of 2023 amongst Danish households. N=986.
The households’ responses to the negative experience varied. In the survey, we have chosen to exclude those who justified their negative experience by stating that the price was higher than expected. This is because it is difficult to separate between those who had a negative experience due to the price development in the market and those who had a negative experience due to actions taken by the electricity retailer. Among those who had other reasons for having a negative experience, 40 percent reported taking no action in response to their dissatisfaction. Approximately 20 percent switched to a different supplier as a result of the negative experience, while 25 percent chose to complain to the electricity retail supplier (Figure 5‑20).
Figure 5‑20: Consumers’ response to a negative experience (Denmark. Multiple choices allowed)
Note: The graph shows action taken by consumer in response to a negative experience. Survey conducted in October and November of 2023 amongst Danish households. N=495.

5.3.5 Impacts of energy crisis

The price of energy increased, thus increasing the awareness of consumers. The consumers were hit financially because of increasing electricity prices. The customers therefore became more aware of their use of electricity, and many changed their contracts from fixed price to spot price as the prices increased. All over Europe, there was a reduction in demand for non-household consumers, which shows that the price mechanism is working. Danish customers did also behave rationally in general by cutting demand and using energy more efficiently. The customers have also reacted by changing their retailer, paying more attention to the size of their consumption, and installing apps to move consumption to off-peak periods during the day. Numbers from the DEA show that as many as 40 percent of Danish households have made energy improvements to their homes in the past year.
The energy saving campaign by the DEA has played a significant role in customers becoming aware of their energy consumption. The DEA implemented a national energy saving campaign, which reached a wide range of customers. It also focused on how to save energy in the workplace, as this is an important part. The campaign increased awareness of saving advice and contributed to significant electricity and heat savings. The consumption numbers from the DEA show that electricity and gas consumption in the second half of 2022 were reduced by 6 percent and 19 percent, respectively, compared to the expected consumption.
Before the energy crisis, customers did not follow up on their electricity bills the way they do now. The customers in Denmark have become more aware of what they can do to change their consumption. Customers realised that the price they paid for the fixed price contracts was a lot higher than the spot price, which resulted in many customers changing to spot price contracts. The spot price contracts allowed the customer to monitor the prices, so they could switch consumption to off-peak times during the day. Before, customers had to pay in advance, but now they pay for what they actually use.
The increase in awareness led to increased pressure on customer service at electricity retailers. The customers had questions about their product and how to save money. Some customers questioned the price of their contracts, either because they misunderstood the contract, or the retailer had increased the price. There have also been questions about the energy bills, as customers generally don’t understand these.
During the crisis, there were some problems with customers not being able to pay their electricity bill. The subsidy to handle these challenges has primarily been through grants. The Danish government created a loan scheme both for households and non-household consumers, which made it possible to freeze the electricity bill when it exceeded a fixed amount. The scheme was created such that electricity retailers entering the electricity market had to handle it. If customers had problems paying, they could contact their local retailer and get help. Not that many customers, however, used this loan scheme. The government also handed out some direct grants to the most vulnerable households with low income, gas furnace, old electricity heating system, etc. The electricity tax was also lowered to the lowest possible level allowed in EU legislation, but the tax has increased back to previous levels this year.
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