Electricity and gas prices: price curbs make suppliers nervous – policy

Gas and electricity must remain affordable for all. Photo: imago images/McPhoto/Erwin Wodicka via www.imago-images.de

The federal government will soon subsidize electricity and gas on a large scale. The industry supports the concept but considers the timetable unrealistic.

Millions of electricity and gas customers will soon get financial relief on a large scale. This is what Chancellor Olaf Scholz (SPD) and the prime ministers of the federal states decided at their midweek meeting. The energy industry welcomes the price curbs, but considers the planned timetable too tight. After federal-state talks, it also became clear that a number of households heating with diesel or wood pellets could get nothing from the aid – although the prices of these fuels have also risen during Russia’s war of aggression against Ukraine. . A mirror.

How should electricity and gas price brakes work?

Two things are planned for natural gas: In the first step, the federal government will take over the advance for private households and traders for the month of December. The current price freeze should then come into force for this group of customers no later than March 2023, for industrial customers, however, from January. For private households and small businesses, the gas price for 80 percent of anticipated annual consumption is capped at 12 cents per kilowatt hour. Anyone who heats with central heating pays 9.5 cents per kilowatt hour within the quota. The market price, which is usually much higher, must be paid for consumption in excess of this. For industrial customers, the subsidized quota is 70 percent of previous consumption and a kilowatt hour of gas should cost 7 cents net.

The electricity price cap should come in for all customer groups on January 1. Private households and small businesses receive 80 percent of projected annual consumption for 40 cents per kilowatt hour, industrial customers 70 percent of previous consumption for 13 cents per kilowatt hour. Gas and electricity price curbs will apply until April 2024. The state seeks to finance the gas price curb from the €200 billion pot (“double boom”). To curb the price of electricity, additional profits of electricity producers should also be devalued.

What does the energy industry say about this?

Industry association BDEW considers the timetable unrealistic. This is especially true for curbing the price of electricity. In this matter, the politicians’ plans are correct, BDEW general manager Kerstin Andreae said on Thursday. However, until January 1, enforcement for electricity suppliers would not be possible. “The will of the energy industry is there, but we are talking about a complex system in which millions of consumers need to be billed correctly with a large number of different tariff structures.” Standardized programs must be completely reprogrammed in hundreds of companies. Andreae said. This requires experts who in turn have limited capacities. “This also applies to curbing the price of gas.” To ease families in the short term, politicians must rely on pragmatic solutions. The federal government could pay the energy bills again in January. Last September there were 300 euros for each employee.

BDEW also thinks it’s possible for the state to get advances for electricity in the same way it does for gas. To ease gas customers until the price curb is introduced on March 1, the federal government may also receive a second advance gas payment. A retrospective introduction of energy price brakes is not feasible from an industry perspective. The federal government would like the gas price curb to begin retrospectively on February 1st, and even the federal states preferably on January 1st.

Are energy price brakes already in law?

No. For this reason, it is also possible that there will still be significant deviations from previous plans. The government cabinet had launched the draft on Wednesday in December for receiving the gas advance, now it is the parliament’s turn. The gas and electricity price curbs will go to the cabinet on November 18. The Bundestag must agree in early December and the Bundesrat in mid-December. So the time pressure is huge.

What about families that heat with oil or wood pellets?

Until now, the Federal Government has had only limited awareness of this consumer group. Unlike gas, there is no shortage of oil and pellets. However, even here the prices have increased significantly. There may be help, but the type and purpose are still unclear. This point will probably play an important role in the legislative process to curb the price of gas and electricity. The resolution document of the federal-state meeting on Wednesday remains vague on the topic of oil and pellets: “Lensees who are burdened by the costs of storing these means of heating should be relieved,” it says. Accordingly, “support in the sense of hardship adjustment is also being considered” for overburdened owners of owner-occupied residential properties.

How does the opposition react to the decisions of the federal and state governments?

CDU energy expert Andreas Jung described the plans as “piecemeal”. Among other things, Jung called for the gas price curb to take effect retrospectively from January 1, thus closing the “winter gap”. The member of the Bundestag also demanded the immediate reduction of VAT for all energy sources. Left-wing member of the Bundestag and economic politician Christian Leye criticized that the gas price curb threatened to come too late.

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