Federal cabinet decides on energy price brakes

Olaf Scholz (right) and Robert Habeck

The Federal Cabinet decided on the price caps for gas, electricity and district heating in a circular procedure.

(Photo: IMAGO/image enclosure)

Berlin On Friday, the Federal Cabinet decided on the planned price brakes for gas, heat and electricity. The current versions essentially differ from the draft laws that became known earlier this week in two respects.

On the one hand, the planned skimming off of excess profits will be limited to the period from December 1, 2022 to June 30, 2023, but can be extended to April 30, 2024. However, the originally planned retrospective skimming off of excess profits will not take place. In government circles it was said that the lost income due to the waiver of the retrospective levy amounted to one billion euros.

In the first drafts for skimming off profits, which were circulating in October, there was still talk of skimming off excess profits from March 2022. Later the date of September was planned.

This had led to an outcry in the energy industry. The companies in the renewables sector in particular had argued that the levy would slow down investment in the expansion of renewable energies.

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The second change compared to the draft legislation from the beginning of the week concerns the question of how the relief from the electricity and gas price brake must be taxed by consumers. This question will initially be deferred and regulated separately, government circles said on Friday. Time is not short on this question, as the taxation relates to the 2023 assessment year.

80 percent of previous consumption is subsidized

The federal government is reacting to the sharp rise in energy prices with price brakes worth billions. The price brakes are intended to cushion the burden on households and companies from next year. It is planned that electricity, gas and heating prices will be limited for a proportion of consumption. As a first step, the Bundestag and Bundesrat had already decided on a December one-off payment that should benefit district heating and gas customers.

With the gas price brake, households and small and medium-sized companies are to receive a guaranteed gross gas price of twelve cents per kilowatt hour for 80 percent of their previous consumption. For district heating customers, the price should be 9.5 cents up to the 80 percent limit. The contract price should apply to the remaining 20 percent of consumption. To reduce the electricity price, households and small companies are to receive 80 percent of their current consumption at a guaranteed gross price of 40 cents per kilowatt hour.

Protest against high inflation

The federal government wants to relieve consumers of electricity and gas bills.

(Photo: IMAGO/aal.photo)

The measures, which are limited to April 2024, were originally intended to take effect from March next year. Citizens and companies are now to be relieved retrospectively for January and February. In March, the relief amounts for the two previous months are to be taken into account.

Special regulations apply to industrial customers with other cent amounts and other basic quotas for which there is a price limit.

However, large consumers from industry cannot hope that the regulations to relieve them from the electricity and gas price brake will be improved. In this regard, there are “no changes,” it said in government circles. You have to comply with the requirements of EU state aid law.

The industry complains that the planned price brakes had to be capped for reasons of state aid law, which they believe are not nearly enough. There is an upper limit of 150 million euros per individual case for the aid. This amount refers to aid for gas, heat and electricity. In specific individual cases, it may be that a company reaches the upper limit with the aid for gas purchases alone and gets nothing when it comes to electricity purchases.

The solidarity contribution to be made by oil and gas companies remained unchanged.

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