The Federal Ministry of Economics has completed a draft law for the electricity and gas price brake. It turns out that all problematic aspects of the Gas Price Commission’s proposals remain. The brakes are inefficient, unbalanced and complex. The watering can construction is still convenient for the traffic light.
So much imbalance as in the double boom was rare. After such a short and intensive drafting period, the electricity and gas price brakes are in place, should be coordinated quickly in the government and should be passed by the Bundestag and Bundesrat by December 16th if possible. Above all, the gas price brake was a difficult birth, for the design of which the traffic light coalition convened a gas price commission for lack of ideas of its own. Their suggestions are largely accepted. With the starting date of January 1, the federal government even goes beyond the expert recommendation, but lags behind the Commission’s advice on other points, such as a ban on bonuses and dividends for companies benefiting from the brakes. But the core problem of the Commission’s draft could not be overcome even by the ministries involved in the draft law: To alleviate the energy price crisis, the state is taking on up to 200 billion euros in debt, but is distributing the money among the people far too imprecisely. This applies in particular to the 40 billion euros in costs that are calculated for the gas price brake alone in 2023.
The nationwide average gas price is currently between 16 and 18 cents per kilowatt hour. The gas price brake applies a lower cap: For the first 80 percent of their consumption compared to the previous year, consumers and small and medium-sized companies pay only 12 cents per kilowatt hour from January to April 2024. Anything beyond that demanded by the supplier is taken over by the state. For many people, this means that in future they will often pay twice as much for heating and hot water as before Putin’s war of aggression, but not more if they reduce their consumption. Good news for middle-income people. These households will be able to handle the price doubling. If you have little, you also have to contend with 12 cents per kilowatt hour of gas. On the other hand, if you have a lot, you still get decent subsidies for private consumption from tax funds. Because the suppliers do not know how many people with how much living space and income are behind a connection, there is no way around this “social immaturity”, as Federal Minister of Economics Robert Habeck himself admitted in an interview with ntv.de.
But the energy price brakes are also having an extremely unequal effect in the middle income brackets. Due to its threshold value of 40 cents per kilowatt hour, as of today, the electricity price brake will only apply to a few consumers anyway. The gas price brake, in turn, primarily rewards those who still have plenty of savings potential in their private consumption; i.e. people who have previously heated large areas generously, bathed daily or taken long, hot showers and perhaps also have a swimming pool in the basement of their villa. They could get hundreds, if not thousands, of euros from the state, while other consumers who have been saving energy for a long time – and in some cases have invested a lot of money to do so – hardly have any more savings potential to minimize the non-subsidized fifth of their previous consumption.
The fact that frustration about such injustices does not boil up too quickly among the people is not least due to the complexity of the construction. Hardly anyone can explain right away how the gas and electricity price brakes are supposed to work. The gas price brake for tenants and not so large landlords is difficult to understand. Because the monthly deductions should be adjusted before the end of the year, so that the effect reaches the consumer. Habeck advises relaxation: Tenants don’t have to do anything except wait until adjusted advance payments and state coal flutter into the house. For a Federal Economics Minister of the Greens, this is an optimistic view of the landlord landscape in Germany, which is not poor in black sheep.
Even the reimbursement of the December down payment, which is to be made in January, should give a first taste of how quickly and reliably the money will be passed on to tenants. The advance reimbursement, as part of the 200 billion double boom, goes to all gas customers, no matter what they earn. And that’s not all of the injustices: the experts from the ministries involved have apparently not found any practicable rules to ensure that the gas price subsidies are not passed on indirectly as bonuses to management and in the form of dividends to shareholders. Not all companies are starving because of the energy prices. You can still take advantage of the help and hit your profits directly. Tax money flows to private investors and institutional investors such as pension funds.
Despite all these shortcomings, the energy price brakes have proven to be the only alternative, simply because there is no other quick-acting idea on the market that would reach as many people in need as possible. It is pointless to speculate what would have happened if the gas price commission had started its work six months earlier and not just in October. It is undisputed that help is needed before low and middle earners face bankruptcy and bakers and metalworkers face bankruptcy. The fact that the draft law against voices from the economy also prescribes a job retention obligation for companies that benefit from the energy price brakes is in the interests of employees and the economy.
But for future crises there is one lesson and a mandate for the federal government: a direct payment to all households with a low net income would have been fairer, cheaper and more effective. It fails because the Federal Ministry of Finance has neither stored all account addresses centrally nor sees itself technically capable of such a simultaneous payment to many millions of accounts – at least not before 2024. At the government bank, the annoyance about this is perhaps less great than expected: the renewed watering can policy saves The three-party coalition started a debate about who should really get money from the state in these times of crisis and who should simply forgo the second holiday abroad instead. Instead, those who remain far away from all the worries of existential distress will also be relieved with massive new debt. The energy price brake is not only an economic instrument, but also a political one: It is intended to act as an energy rage brake.
