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ENERGY

German local authorities demand reduction in energy prices

As energy prices continue to rise, the German Association of Cities is calling for higher assistance for low-income earners and the reform of electricity taxes and levies.

Electricity meter
An electricity meter shows household's electricity use in kilowatt hours. Photo: picture alliance/dpa | Hauke-Christian Dittrich

“The high energy prices at the beginning of the cold season are worrying us,” Helmut Dedy, Chief Executive of the Association of Cities, told the Rheinische Post on Monday.

“The federal government should support those affected with electricity price support and housing subsidies.”

No one should sit in a cold flat in winter because they cannot afford heating, he added.

Specifically, the Association of Cities is pushing for an increase in the heating allowance in the housing allowance for low-income households.

“This affects more than 660,000 households in Germany, 153,000 of them in North Rhine-Westphalia alone,” said Dedy. 

Last year, when the CO2 tax went up, the government offered additional support to lower income households by providing compensation for heating costs to people receiving housing benefits.

Dedy believes this could serve as a model for the coming winter.

Energy bills up 25 percent 

The cost of heating a house has risen dramatically in Germany over the past year. From a 15-year low of 5.44 cents per kilowatt hour in late 2020, the price climbed to 7.01 cents per kilowatt hour this October.

For some households, this means that monthly bills have risen by 25 percent in the space of a year. 

Speaking to Tagesschau, Leonora Holling from the Association of Energy Consumers predicted that consumer energy prices were now on course to exceed their previous peak in 2008, when the price climbed to 8.09 cents per kilowatt hour.

On October 15th, German grid operators announced that the government would be slashing the Renewable Energy Act (EEG) surcharge to ease the burden on struggling households. 

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The green levy, which is used to fund renewable energy sources like wind and solar, will be slashed by more than 40 percent to 3.72 cents per kilowatt hour from January 1st, 2022. This will be the lowest the levy has been in around ten years.

“We welcome the fact that the EEG levy is to be reduced in the new year,” Dedy said. “But that is not enough. The new federal government should abolish the EEG levy.”

The SPD, Green and FDP parties – which are currently in talks to form a coalition government – say they want to stop funding the EEG levy via electricity costs as soon as possible.

Helmut Dedy, CEO of Association of Cities
Helmut Dedy, CEO of the German Association of Cities, says the EEG levy should be dropped entirely. Photo: picture alliance/dpa/dpa-Zentralbild | Britta Pedersen

However, the three parties did not say when exactly the levy would be completely abolished and how renewable energy would be financed after the levy is dropped.

The Association of Cities is now demanding more speed, and has also called on the new government to “reform the system of taxes and levies on electricity”.

The government should aim promote the production and wider adoption of green, renewable energy sources through this reform, they said. 

“If we do this, it also helps the economy,” Dedy stressed.

According to the Association of Cities, the current situation of soaring prices has made it clear that people need to become independent of fossil fuels with their strongly fluctuating prices as quickly as possible.

Business associations are already warning that the massive increases in gas and electricity prices pose a wider risk to the German economy as a whole.

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MONEY

Where in Germany do people have the highest disposable income?

An economic study has shown huge regional differences in income throughout Germany. So which parts of the country have the most to spend each month, and which are feeling the squeeze?

Where in Germany do people have the highest disposable income?

A study by the Economic and Social Sciences Institute (WSI) of the Hans-Böckler foundation reveals stark regional differences in disposable income in Germany. In some cases, households had as much as double the spending money of those in other parts of the country. 

Here’s where people have the most – and least – disposable income each month.

What is disposable income?

The WSI calculated disposable income as the sum of income from wealth and employment, minus social contributions, income taxes, property taxes and other direct benefits or taxes.

What’s left is the income which private households can either spend on consumer goods or save.

The study, which was based on the most recent available national accounts data for 2019, looked at the disposable income of all of the 401 counties, districts and cities across Germany.

Which regions have the highest and lowest disposable incomes?

The study found that the regions with the highest disposable incomes were in the southern states.

Heilbronn in Baden-Württemberg had the highest disposable income of all 401 German counties and independent cities – with an average per capita disposable income of €42,275. The district of Starnberg in Bayern followed in second place with €38,509.

READ ALSO: REVEALED: How much do employees really earn across Germany’s states?

By comparison, per capita incomes in the cities of Gelsenkirchen and Duisburg in North Rhine-Westphalia were less than half as high, at €17,015 and €17,741 respectively. These regions had the lowest disposable income in the country. 

The study also found that, more than thirty years since German reunification, the eastern regions continue to lag behind those in the west in terms of wages.

According to the WSI, the Potsdam-Mittelmark district is the only district in the former east where the disposable per capita income of €24,127 exceeds the national average of €23,706.

Do regional price differences balance things out?

The study also showed that regionally different price levels contribute to a certain levelling out of disposable incomes, as regions with high incomes also tend to have higher rents and other living costs.

“People then have more money in their wallets, but they cannot afford more to the same extent,” WSI scientist Toralf Pusch explained.

READ ALSO: EXPLAINED: When will Germany raise the minimum wage?

Therefore, incomes in the eastern states, adjusted for purchasing power, are generally somewhat higher than the per capita amounts would suggest.

That could explain why, even after price adjustment, the cities of Gelsenkirchen and Duisburg in western Germany continue to be at the very bottom of the list.

Saxon-Anhalt’s Halle an der Saale, on the other hand, which has an average disposable income of only €18,527, benefits from the lower prices in the east.

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