The idea comes from the summer: In order to relieve households in the face of rising prices, an “electricity/gas price brake” is conceivable, according to a paper by the SPD parliamentary group at the beginning of September. Corresponding laws are now to be passed in the Bundestag this Thursday and in the Bundesrat on Friday.
The energy price brakes are part of the “double boom” announced by Chancellor Olaf Scholz at the end of September, which was intended to help “energy prices to drop quickly, quickly and in a way that everyone can quickly see”. If they do that, it’s not because electricity and gas prices are being “slowed down,” but because the state is stepping in with a billion-dollar watering can. Actually, the measures should be called energy subsidies.
How expensive are the energy price brakes and where does the money come from?
In the double-boom press conference, Scholz, Economics Minister Robert Habeck and Finance Minister Christian Lindner already put the protective shield needed for the electricity and gas price brakes at 200 billion euros.
In order not to have to allocate this sum to the normal budget, the federal government has reactivated the Economic Stabilization Fund. The WSF was launched in March 2020 to support large companies that got into trouble as a result of the Corona crisis – such as Lufthansa.
The WSF is to absorb the 200 billion this year so that the debt brake can at least officially be complied with again in 2023. The Union has raised the question of whether this practice is constitutional. The Federal Constitutional Court is likely to give an answer in the coming year as part of a procedure in which the WSF is only marginally involved.
Income from the absorption of so-called random profits from energy companies should also be used for financing. How high the yield will be exactly is still open. In a paper from the end of November, the Federal Ministry of Economics calculated that the income from the siphoning off of random profits would reduce the amount of funds required from the federal budget “by several billion”.
Who gets the Energy Aid?
Private households, small and medium-sized companies and large industrial consumers of electricity, gas and district heating benefit from the subsidies. The price brakes for households and small and medium-sized companies will apply from March, with retrospective relief planned for January and February. For large companies, the gas price brake will take effect as early as January.
The regulation for private households and small and medium-sized companies looks like this: The gas price is capped at 12 cents per kilowatt hour for a quota of 80 percent of the annual consumption forecast in September 2022. With district heating it is 9.5 cents per kilowatt hour. What is consumed above that is subject to the normal market price. This should create an incentive to reduce energy consumption. It is similar with the electricity price, which is also capped at 40 cents per kilowatt hour for a basic requirement of 80 percent. In addition, gas and district heating customers do not have to pay a deduction in December. The price brakes are to apply until April 30, 2024.
And users of pellet and oil heating systems?
The traffic light coalition also wants to relieve households that heat with “non-pipelined fuels” – this includes heating oil and pellets as well as liquid gas. However, the agreement on this has only just been reached and is not part of the electricity and gas price brakes. Details are to be clarified in an agreement between the federal and state governments, the payment is then a matter for the state.
Isn’t it unfair if households also receive help that they don’t even need?
In its draft legislation, the traffic light points out that the discounts received are taxable for those consumers who still have to pay the solidarity surcharge. These are the top 10 percent of income taxpayers. From the point of view of the federal government, this ensures “socially fair compensation”.
Critics see it differently. “The question is whether the help will reach the people who need help,” said the head of the Federal Association of Consumer Centers, Ramona Pop, of the German Press Agency. Those who would have heated a lot and consumed a lot usually did not have to pay attention to the prices. “These are now getting more than those who were frugal in the past.”
The head of the Verdi union, Frank Werneke, made a similar statement: “The social balance of the measures is not right.” Tenants with low or middle incomes would receive support of a few hundred euros per year. “Owners of a large house with higher consumption may be supported with several thousand euros.” In the coming year it is urgently necessary to support households with low to medium incomes directly with an “energy money”. For financing, it would be “absolutely appropriate,” said Werneke, to levy an energy soli on people with high incomes or to raise the top tax rate.
The economist Rüdiger Bachmann, on the other hand, argues that the federal government could not have done it any other way. “It is true that there is a connection between gas consumption and income.” It could be “that someone uses a lot of gas because he has a pool. But it can also be that he is sitting in a badly insulated apartment, or that it is an old widow whose house is actually too big and who quickly freezes.”
How is it to be ensured that energy suppliers do not use the price brakes to cash in?
According to calculations by Check24, the average electricity price in November for households with an annual consumption of 5000 kilowatt hours was 42.7 cents per kWh. In November 2021 it was 31.6 cents. At the beginning of the year, many energy producers announced further price increases – usually to more than 40 cents per kWh, to which the basic requirement is capped.
The suspicion is that some providers want to cash in here. “We do not rule out that one or the other company uses the price brakes to increase more than is absolutely necessary,” said the energy expert at the North Rhine-Westphalia consumer center, Udo Sieverding.
To prevent this, the traffic light included a “ban on abuse” in the draft law. They contain a series of measures that the Federal Cartel Office can impose on companies that violate the ban. Above all, they contain a reversal of the burden of proof: the companies must prove to the Federal Cartel Office that the increase is objectively justified.
Sieverding doubts that this regulation is sufficient. There is a ban on abuse. “But who should seriously check that? And besides, the providers were able to increase it in January before the law came into force.”
What rules apply to large companies?
For industrial customers, the gas price per kilowatt hour will be capped at 7 cents net from January, and for heat at 7.5 cents net, in both cases based on 70 percent of annual consumption in 2021. For electricity, the price for industrial customers is 13 cents plus taxes and levies and charges for 70 percent of previous consumption.
However, the Federation of German Industries (BDI) criticizes that the gas price brake is far too bureaucratic, so that the relief can reach energy-intensive companies too late or not at all. Criticism also came from the German Trade Association (HDE). Association President Alexander von Preen told the Funke media group that state aid would help. “For us, the reference period 2021 is a problem for the calculation. At least the lockdown times should be calculated here.”
Shouldn’t there be a European gas price cap?
Yes, yes. But there is no agreement here – partly because Germany is blocking. Because the gas price cap planned at European level is designed differently than that of the federal government. Accordingly, the price for gas should be capped at 275 euros per megawatt hour. However, this is planned as a real cap, not as a subsidy. The traffic light coalition rejects this: Economics Minister Habeck called such a path “extremely delicate” because it would interfere with a market that is supposed to guarantee the supply.
