Electricity prices in Europe have reached their highest level on record, which could have a long-term negative impact on industry and households, the Financial Times wrote.

In Germany, the cost of contracts for next year's supply jumped to a record 325 euros per MWh on Monday, surpassing the previous high of December. Quotes for similar contracts in France have doubled since the start of the year to 366 euros per MWh.

Electricity prices are heavily dependent on the cost of gas, which is now at its highest level in four months. Compared to last year, gas has quadrupled in price due to restrictions on supplies from Russia.

The situation is exacerbated by maintenance problems at a large number of French nuclear power plants. Neighboring countries are using extra gas to generate electricity for France, while Europe is trying to stockpile for the winter for fear of further cuts in Russian exports.

"This is not a situation that anyone in Germany saw on their schedules even a year ago," said Hanns Koenig, head of projects at research firm Aurora Energy.

According to the German Federal Grid Agency, June net exports to France were about 600,000 MWh of electricity, compared with 300,000 MWh of net imports a year earlier. The U.K. also supplies electricity to France on a daily basis at a rate comparable to 10 percent of domestic demand.

The high prices reflect traders' expectations that the tight gas supply situation will last at least another year, said ICIS electricity analyst William Peck.

"Gas didn't have enough investment in new production infrastructure during COVID-19, and demand came back faster than people expected. Prices started rising a year ago," he said, with Russia's war against Ukraine giving the process a "turbo boost."

Germany plans to bring back up to 10 GW of coal-fired power capacity, but analysts say that will not bring strong relief to the electricity market because of record high coal prices.

As a result of skyrocketing energy import costs and a weakening manufacturing sector, Germany's foreign trade balance turned negative in May for the first time since 1991. The deficit was 1 billion euros.

Hamburg authorities warned residents last weekend that hot water rationing may be needed in winter if gas shortages are as severe.

The high cost of electricity has already led to lower consumption. Peck of ICIS said demand for electricity in Germany has fallen 5 percent in the past four months compared with the previous year because of higher costs, mostly due to reduced operations by industrial consumers.