April 3 (Bloomberg) -- German utilities including RWE AG and E.ON AG will face pressure to lower power prices today when they meet with Chancellor Angela Merkel at a summit called to overhaul the country's energy policy.

Industrial users in Germany pay record-high power prices, while prices for consumers are the second-highest in Europe after Italy, following a rise of 50 percent last year at the Leipzig EEX energy exchange. The government is also calling the summit because of concern about over-dependence on Russia, from where Germany gets more than 40 percent of its natural-gas supplies.

Companies also want to maintain the country's nuclear power capacity, which accounts for about a third of German power generation. Phasing out nuclear power, currently the cheapest form of energy in Germany, would lead to further price increases, executives including EnBW Chief Executive Utz Claassen have said.

``The focus will be on how we can ensure security of future supplies as well as how to lower electricity prices in light of environmentally friendly standards,'' Merkel said in a speech to the lower house of parliament in Berlin on March 29.

The government is committed to shutting down nuclear plants by the early 2020s, meaning some 40,000 megawatts in generation capacity need to be replaced. Some members of Merkel's Christian Democratic Union have said they are opposed to the measure.

``Everything will be on the table for discussion,'' Economics Minister Michael Glos said March 30. Merkel, though, has said she is unwilling to dwell on nuclear power during the talks, which start at 6 p.m. Frankfurt time.

The government wants to produce a new energy policy before the end of the year for what is Europe's largest market for power and the continent's second-largest market for natural gas.

Russian gas

The summit was in part convened in response to Germany's dependence on foreign gas imports, particularly following Russian gas operator OAO Gazprom's decision to halt supplies to Ukraine on Jan. 1 amid a dispute over prices. Germany received 19.5 percent -- equivalent to 7.54 billion cubic meters -- of Russia's entire gas exports in the first two months of this year, according to Bloomberg data.

Consumers and industry may be disappointed if they expect quick-fix price reductions after the talks, Environment Minister Sigmar Gabriel said in an interview in the Frankfurter Allgemeine Sonntagszeitung on Apr. 2. ``Energy will never be cheap again,'' he said.

The talks may focus on the long-term development of environmentally friendly energy that's home-produced, Gabriel told the paper.

Renewable Energy

Companies involved in renewable energy want Merkel to demonstrate in any new energy program how she plans to safeguard their investments and profit, said Ulrich Schmack, founder and chairman of Schmack Biogas AG, a maker of methane-powered generators.

Schmack, who's attending today's talks, said he expects Merkel to support moves to help Germany shift ``as quickly as possible'' from fossil fuels to power from renewable sources.

The search for a new energy mix has seen German lawmakers discussing whether coalminer RAG AG should keep pits open longer than 2012, the kick-off for accelerated closures. RAG said March 29 it may build a new coal-fired power plant in response to plant closures.

The government has set up a regulator to help increase competition. Consumers face winter fuel bills that are a third higher than last year, according to Aribert Peters, chairman of the Union of Energy Consumers, which advises its 10,000 members on energy saving.

Unable to pay

``Thousands and thousands of Germans won't be able to pay these bills,'' said Peters in an interview. ``Merkel's got to do something to strangle prices.''

The government argues that utilities have driven up power prices by charging customers for certificates issued free of charge for a power plant's carbon dioxide emissions.

``This results in higher power prices for consumers and significant windfall profits for generators,'' the government said in a report that it wants to use as the basis for today's discussions.

The VDEW group, representing Germany's big four utilities, argues taxes and other levies add up to 40 percent to consumer power prices. Together they plan to spend about 40 billion euros ($48.4 billion) on new energy production by 2020.

Prices for future power deliveries at the Leipzig exchange rose an average 30 percent to 57.60 euros ($69.3) per megawatt hour in the four months to March, according to Roland Schmied, spokesman for the Essen-based VIK group that represents Germany's biggest industrial power users, including Siemens AG, BASF AG and ThyssenKrupp AG.

To contact the reporter on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Peter Dinkloh in Frankfurt at pdinkloh@bloomberg.net.

Last Updated: April 3, 2006 09:46 EDT