Gas price brake and electricity price brake should apply retrospectively from January

For those who are already paying more, the following applies: the monthly deductions should decrease accordingly. In March, the relief amounts for January and February 2023 will also be credited retrospectively, according to the corresponding draft law, which is available to the Handelsblatt. District heating customers also benefit.

The commission of experts set up by the federal government had proposed paying relief from the price brake only from March. The fact that the government now also wants to include January and February means a “very strong relief,” said Commission Chair Veronika Grimm to the Handelsblatt. The economy warns: “It can easily trigger the next justice debate if gas customers are better off than those who heat with other energy sources.”

Michael Kruse, energy policy spokesman for the FDP parliamentary group, warns the Handelsblatt to be precise. So that the gas price brake does not become a boomerang, competitive incentives must be maintained in the market, said Kruse. In addition, there should be no abuse, for example by providers “preventively increasing their prices to the price of the lid”. Such abusive competitive practices must be prevented by the draft law, added Kruse. Paragraph 28 of the gas price brake bill takes these considerations into account. It states that gas suppliers are prohibited from raising prices to an extent that does not result from market developments or an increase in procurement costs.

For industry, the gas price brake will apply from January 2023. The price per kilowatt hour will be capped at seven cents net for industrial customers. The industrial gas price brake applies nationwide to around 25,000 companies. In addition, 1,900 hospitals are to benefit from the regulation.

Electricity price brake: Relief for January and February is to be paid in March

The electricity price brake is also to apply from March 1, 2023 to April 30, 2024. In March, the relief amounts for January and February 2023 will also be credited retrospectively.

The electricity price for private consumers and small and medium-sized companies with a power consumption of up to 30,000 kilowatt hours is limited to 40 cents including all taxes, levies, levies and network charges. This applies to 80 percent of the previous year’s consumption. For industrial customers, the limit is 13 cents plus taxes, duties and surcharges for 70 percent of previous consumption.

The expenses for the electricity price brake are to be recovered in part by skimming off random profits from certain electricity producers. Only “profits at a level that nobody expected” would be addressed, according to government circles.

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The rule had long been debated. Representatives of the energy industry had criticized in particular that the random profits should also be skimmed off retrospectively. However, the coalition is accommodating the industry: The retroactive effect should only apply from September 1, 2022. In early drafts there was still talk of a retroactive effect from March 2022. The regulation should apply until “at least June 30, 2023”.

Power plants that can produce electricity cheaply and sell it at high prices are affected by skimming off profits, because the generation costs of other power plants, especially gas-fired power plants, have risen very quickly and very sharply.

The power plants with the comparatively low electricity generation costs include wind, photovoltaic and hydroelectric power plants, waste incineration plants, nuclear power plants and lignite-fired power plants. Random profits are only skimmed off at these power plants.

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“The EU regulation also allows the profits of hard coal-fired power plants to be skimmed off. However, this is not implemented for reasons of security of supply, otherwise the proportion of electricity generated from gas could increase. Because gas is scarce, this must be avoided at all costs,” says government circles.

The amount of the levy is based on the amount of electricity generated, the production costs and the prices achieved on the market. “Reference costs” are calculated from this information. For renewable energy systems, additional information from bids at the auctions for funding under the Renewable Energy Sources Act is used. In addition, there are “safety surcharges”, according to the federal government.

Gas price brake: Industry may resell subsidized gas

With the agreement on Tuesday, two major points of contention regarding the gas price brake were also resolved – at least for the time being. With the gas price brake, it was unclear until recently whether industrial consumers would be allowed to resell the subsidized gas. At this point there was an open dissent between Chancellor Olaf Scholz (SPD) and his Vice Robert Habeck (Greens). Scholz argued that the companies should not make profits with taxpayers’ money, which would happen if the state-subsidized gas were resold.

Habeck countered that resale was urgently needed so that the industry would continue to have opportunities to save gas. The ban on resale would otherwise force companies to consume and could, in the worst case, trigger a gas shortage. The solution is now clearly in the direction of Habeck.

In principle, the following applies: companies are still able to resell, regardless of whether they make use of the gas price brake or not. “This strengthens the incentive to save natural gas and contributes to securing the gas supply and stabilizing the gas markets,” says the draft law.

>>Read here: “This is the last thing we should do” – Gas Commission criticizes the Chancellor’s plans

Even now, companies that have contracts with their energy supplier for the purchase of a certain minimum quantity of gas can resell their gas as they wish, despite these contracts. A few months ago, the government declared contract clauses on minimum purchase quantities to be void. This regulation is now being extended until April 2024 – regardless of whether a company makes use of the gas price brake.

Industrial companies with greater consumption of ten megawatt hours or more are also entitled to simply return unused gas to their supplier. The latter then has to reimburse them the full market price. The provider can collect a flat-rate fee of ten percent of the reimbursed amount. This regulation will also be extended until December 31, 2023. And the same applies here: whether a company makes use of the gas price brake or not is completely irrelevant.

“The compromise found should prevent the worst: namely that large savings projects are not implemented or even reversed,” praised economist Grimm.

With its plan, the federal government wants to resist the loud calls from trade union representatives. They fear that resale could result in large-scale halts to production and subsequent industry collapse.

The federal government wants to counter this with a location guarantee instead of a ban on resale. Companies that receive more than two million euros in aid must retain 90 percent of the jobs by April 30, 2025 or make corresponding agreements between the collective bargaining parties.

Gas and electricity price brake: No general bonus and dividend ban

There are no other exclusion criteria for industry. The federal government does not want to impose a general ban on bonuses and dividends. This should only apply to companies that receive equity support. That would affect the nationalized importer Uniper, for example, but none of the many thousands of companies that will take advantage of the gas and electricity price brake.

This plan is likely to cause trouble internally. The traffic light representatives in the powerful Budget Committee of the Bundestag recently passed a resolution according to which they want to link the price brakes to a ban on bonuses and dividends in general.

Group circles said on Tuesday that the federal government’s draft law could not remain as it was. The demands from the decision of the budget committee would apply, the law had to be changed accordingly.

There was also agreement with the FDP that parliamentary group leader Christian Dürr had finally gone public with the demand. What you can talk about are certain limits and thresholds, it said.

Industry circles, on the other hand, are skeptical about the implementation of the ideas of the traffic light housekeepers. In many family businesses, the bonuses they blame are family income.

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