How the state wants to save the gas industry from collapsing

Paragraph 29 removes obstacles to rapid federal involvement in the interests of security of supply. For example, the federal government should be released from the obligation to submit a takeover bid to all shareholders as soon as it gains control. Silent contributions would also be possible without the approval of the general meeting. General meetings should also be able to decide that the federal government can purchase new shares at special conditions below the share price.

Economics Veronika Grimm believes that a large-scale rescue operation with a view to Uniper and other gas suppliers is appropriate. The threatened supply stop of Russian gas could “quickly lead to massive liquidity problems”. “Aid measures, even with massive state funds, are therefore indicated,” Grimm told the Handelsblatt. This is necessary to ensure the supply, but also because the suppliers will have to play an important role in the energy transition in the future.

Can gas importers pass on higher purchase prices?

Paragraph 24 of the EnSiG, which was only amended in May, already creates this possibility. The prerequisite is the existence of a gas shortage, which has not yet been declared. With the current amendment, the regulation is more precise. In particular, it is made clear that there is no automatic mechanism between the declaration of the alarm or emergency level in accordance with the gas emergency plan and the activation of the statutory price adjustment rights.

The aim is to “maintain the market mechanisms and supply chains for as long as possible and to prevent cascading effects,” according to an internal government paper. With reduced gas imports, it can be expected that gas will become significantly more expensive on the market.

And further: “If the energy companies cannot pay the high prices or fulfill their contracts, there is a risk of financial difficulties up to and including insolvency. However, if the energy companies break away, there is a risk of serious disruption in the entire market along the supply chain right through to the end consumer.”

What is the relationship between the price adjustment clause and the planned surcharge and state aid?

As an alternative to the price adjustment rights of Section 24 EnSiG, the new Section 26 EnSiG creates an ordinance authorization for a pay-as-you-go mechanism, which is referred to in the draft of the law as “balanced price adjustment”. An “independent treasurer” should therefore determine the additional costs for the replacement procurement of natural gas and distribute them to all gas consumers via a levy.

Here, too, one of the prerequisites is that a gas shortage is detected. The beneficiaries of the amounts collected through the levy are the gas importers, who have to spend significantly more money on gas procurement in order to be able to meet their contractual delivery obligations.

Those gas consumers whose suppliers have to procure replacement Russian gas that is no longer supplied at high prices at short notice are severely affected by the price adjustment clause in accordance with Paragraph 24 of the EnSiG. Gas consumers whose suppliers, for example, still benefit from long-term, low-cost gas procurement contracts from Norway would not be affected by the price adjustment clause.

“For gas consumers from industry, the question of which contracts their gas supplier has concluded is of existential importance,” says an industry insider. It is precisely for this reason that the price adjustment clause in paragraph 24 is now supplemented by the levy in accordance with paragraph 26: the levy is intended to ensure that all gas customers are compensated.

Economics Veronika Grimm is critical of the allocation system: “Those consumers who have deliberately looked for a – presumably more expensive – provider who does not purchase Russian gas will then be charged again.” But the price adjustment clause also brings with it many problems. “Individual consumers would be hit extremely hard. It would be difficult to relieve them in return, because it is questionable whether they can be identified so precisely,” said Grimm.

At the beginning of the rescue chain, however, should be the state aid, which is regulated in paragraph 29 EnSiG. The thinking behind it: If the state gives a company like Uniper money so that it can even cope with the increased procurement costs, the buyers, such as the municipal utilities, are also helped. Because Uniper can then fulfill its delivery obligations under the existing contractual conditions.

No surcharge has to be levied, and the price adjustment clause is also not used. But this system is reaching its limits because the state will not be able to level out all price jumps through unlimited and unlimited use of funds. So, in a next step, the levy and then the price adjustment clause should be considered. A “beautiful construction kit” has now been created that can be used depending on the development, according to government circles.

Are the changes urgent?

yes they are This is to be seen against the background that the maintenance of the Nord Stream 1 Baltic Sea pipeline, which is scheduled to last ten days, begins on July 11. Federal Minister of Economics Robert Habeck has repeatedly expressed the fear that Russia could use the maintenance work as an excuse to permanently shut down Nord Stream 1.

A few weeks ago, the Russian gas company Gazprom reduced deliveries through the pipeline by 60 percent. Fears of increasing supply bottlenecks have already pushed gas prices in Europe to a four-month high. On Tuesday, the trend-setting futures contract TTF rose to around 175 euros per megawatt hour on the energy exchange in the Netherlands. This is the highest level since March.

Compared to the previous day, there is a price increase of around eight percent. If gas transport were to stop altogether, the gas supply crisis would worsen, and further price jumps on the gas spot market would be likely.

According to the unanimous assessment of many experts, the legally defined goal of bringing the natural gas storage facilities in Germany to a level of 80 percent by October 1st would hardly be achievable. So if gas transport through the Baltic Sea pipeline actually comes to a standstill, the various instruments must be ready to prevent the worst from happening.

That’s why the Bundestag should decide on the planned changes to the law this week, the last week of meetings before the summer break. The Federal Council should agree on Friday.

Will it be easier for companies to switch from gas to alternative fuels such as oil or coal?

Yes. Authorities may deviate from the specifications in the Federal Immission Control Act (BImSchG). This should make it easier for companies to replace gas with oil or coal as a fuel. The fuel switch increases environmental pollution because oil and coal burn “dirtier”. This applies to sulfur emissions, for example. Under normal circumstances, this triggers lengthy approval processes. In view of the crisis situation, the changes should now be made significantly easier.

What help is there for energy-intensive industries?

In addition to the existing aid, the federal government wants to start another aid program for energy-intensive industry. “Industrial companies affected can receive a subsidy of up to 50 million euros for their increased natural gas and electricity costs without being obliged to repay them,” says an internal government paper. The grant program is said to have a total volume of five billion euros.

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