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ENERGY

Germany may place caps on gas use in winter, warns minister

As Russia continues to stem the flow of gas into Europe, the German Economics Minister believes emergency measures may have to be in place over winter.

Economics Minister Robert Habeck
Economics Minister Robert Habeck (Greens) gives a talk in Denmark on June 25th. Photo: picture alliance/dpa/Ritzau Scanpix Foto | Bo Amstrup

Economics Minister Robert Habeck (Greens) has warned that the government may have to step in to regulate gas usage if there are shortages this winter.

Over the colder months there is a “medium-term” threat of a scenario in which “reductions (in gas usage) will actually have to be imposed by law,” Habeck said before a meeting with other EU energy ministers in Luxembourg on Monday.

Such a reduction would lead to “a severe economic crisis” in Europe and Germany, he said. 

The minister did not say who exactly could be affected by reductions.

READ ALSO: German environmentalists call for caps on energy usage

He said this would depend on the specific situation and how cold the winter would be, where there were “regional supply bottlenecks” and on calculations about which industries were involved in different supply chains.

At the same time, Habeck stressed that “solidarity-based” and “very quick action” was necessary to avoid such a scenario.

Aid alliance with EU neighbours

In order to avoid caps on gas usage, the rapid expansion of renewable energy sources and the increase of energy efficiency “could be decisive components”, Habeck added.

At the meeting in Luxembourg, the EU energy ministers are discussing these two issues as parts of the EU’s planned “Fit for 55” climate package.

EU Energy Commissioner Kadri Simson, who is attending the meeting, said that 12 of the 27 member states – including Germany – are currently receiving less gas from the Russian energy company Gazprom. 

Though Gazprom has claimed that the reductions in gas supply to Germany are due to repairs on the Nord Stream 1 pipeline, Berlin has accused the Kremlin of using gas as a ‘weapon’ to punish allies of Ukraine. 

READ ALSO: ‘Scarce commodity’: Germany raises gas alert level as Russia reduces supply

In the event of a crisis this winter, the government said it would form an aid alliance with neighbouring countries such as the Czech Republic, Austria, Poland and also France.

“We would not make any progress at all if we could not fall back on France, Belgium, the Netherlands and Norway, who are supporting us,” said Habeck.

Algeria is also increasing the quantities of gas supplied via Italy.

“We are dependent on solidarity here,” said the Green politician.

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MONEY

What gas customers in Germany need to know this autumn

Germany's gas levy has been dropped and a price cap is on the way. But there are some other changes coming from October including a VAT cut and smaller surcharges. Here's what it means for your bills.

What gas customers in Germany need to know this autumn

The German government is reducing the value-added tax (VAT) on gas consumption. The rate will be reduced from 19 to seven percent, for a limited period from October 1st until the end of March 2024.

But that is not the only change for gas bills this autumn, though the government says it will no longer levy the gas procurement surcharge of 2.419 cents per kilowatt hour (kWh), which was also originally planned to take effect on October 1st. Instead, two other smaller levies will be due: the gas storage levy and the balancing energy levy. 

Here’s a look at what it means for households.

READ ALSO: Why did Germany make a u-turn on gas levy – and what do the new plans mean?

What does the VAT cut mean?

The VAT cut was originally meant to offset the major gas levy. Even though these plans have been shelved, the VAT cut – down from 19 to seven percent – is still happening. This should have a big effect on people’s bills.

According to the comparison portal Check24, this change would relieve a family by around €306 a year. A single person would see savings of around €87. These calculations are based on a yearly annual consumption of 20,000 kWh for a family, and 5000 kWh for a single household.

What about levies?

The gas procurement levy is off the table, but two other new surcharges will be added to bills from October 1st. These are the balancing energy surcharge or Regelenergieumlage (0.57 cents/kWh) and the gas storage surcharge or Gasspeicherumlage (0.059 cents/kWh).

For a household with an average yearly consumption of 20,000 kWh, the balancing energy levy increases the gas bill by €114 a year, while the gas storage levy adds another €12.

For a single household, the new surcharges will increase the annual gas bill in total by about €31.45.

However, the bottom line is that the various changes on October 1st will result in an average reduction of €180 for a family in Germany while a single person will have save on average €55.55.

Despite these changes, there is no escaping the general trend for rising gas prices compared to a year ago.

And the gas price for consumers reached a new record value of 21.9 cents per kilowatt hour in September.

That means a sample household with a consumption of 20,000 kWh pays on average €4,371 a year for gas usage. In September 2021 the same quantity of gas cost €1,316, according to Check24, meaning that the average gas bill has more than tripled within a year.

This will particularly affect people coming to the end of their contract or starting a new one where they will face the steep prices. 

Gas price cap coming

In view of the rapidly rising gas costs, relief for consumers provided by the reduction in VAT is probably only a drop in the ocean, especially as it will be counteracted to some extent by the two new levies effective from October 1st.

The gas price cap, which the government has agreed on in principle, is therefore the only measure likely to bring tangible relief for households and also companies.

Details of how this will be implemented are not yet available, although proposals are to be presented soon. Much will depend on how high the state-subsidised “base consumption” of gas for households is set.

READ ALSO: Germany to spend €200 billion to cap soaring energy costs

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