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Verbund CEO says volatility is the 'new normal' on power and gas markets

By Alexandra Schwarz-Goerlich

VIENNA (Reuters) - European countries must expect volatile power and gas markets in the long run even after the current conflicts in Ukraine and the Middle East have faded, the head of Austrian hydropower heavyweight Verbund told Reuters in an interview.

The escalating conflict between Israel and Hamas in Gaza has sent oil prices higher, and while gas and power prices have fallen far back from peaks reached after Russia's invasion of Ukraine, they remain higher on average than before the war.

"Turbulence on energy markets is the new normal," Verbund CEO Michael Strugl said. His company is one of the largest producers of electricity from hydropower in Europe, with around 130 hydropower plants in Austria and the neighbouring southern German state of Bavaria.

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"Our assessment is that we will no longer see the price level we had in the past (before the war in Ukraine)," Strugl said, declining to provide more specific price forecasts.

In the past year daily wholesale gas futures prices, which are closely linked to power prices, have on average been twice as high as they were in the year before the war in Ukraine.

Most of this year they have hovered between 20 and 50 euros ($21.23-$53.09) per megawatt hour (MWh). Until 2020 they rarely went above 30.

Russia's invasion of Ukraine last year sent wholesale gas and power prices soaring and governments scrambling to cushion the large knock-on blow to consumers.

A consumer rights group acting at the request of the Economics Ministry won a case on appeal against Verbund challenging a price increase in spring of last year.

Verbund has now appealed that ruling to the Austrian Supreme Court. Should Verbund lose, around 350,000 customers could be entitled to a refund.

"We urgently need a legal basis that holds up in court," Strugl said, adding that the company had set aside 100 million euros to cover the potential costs.

($1 = 0.9416 euros)

(Writing by Francois Murphy; Editing by Jan Harvey)