Why households in Germany will soon face gas bill hikes

DPA/The Local
DPA/The Local - [email protected] • 28 Jul, 2022 Updated Thu 28 Jul 2022 12:52 CEST
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A person turns the radiator on. Gas bills are set to go up in Germany. Photo: picture alliance/dpa | Fabian Sommer

Gas bills in Germany will likely rise significantly later this year as a new law is set to come into force in October allowing companies to pass on rising prices to consumers.

A Gasumlage - or levy - is expected to apply from October 1st until the end of March 2024, according to Economy Ministry sources. 

The levy is aimed at relieving pressure on struggling suppliers by allowing them to pass on up to 90 percent of the extra costs of soaring gas import prices to consumers. 

READ ALSO: Germany must use less gas, warns regulator 

The higher costs affect all gas customers - whether private households or companies - in Germany, including those on long-term contracts who have already agreed fixed payments. It is unclear whether customers will see cost increases immediately after the levy is brought in.

It's also not clear at this stage how much the increase will be for households. German Chancellor Olaf Scholz warned last week that a four-person household could expect an increase of €200-300 per year.

Federal Economics Minister Robert Habeck on Thursday suggested the levy could range between 1.5 and 5 cents per kilowatt hour, but that this would depend on several factors, including procurement costs.

Asked about an estimated cost for a family of four, Habeck said that if the average consumption was 20,000 kilowatt-hours of gas per year, it could end up being not far off Scholz's estimate.

He said it was not yet possible to say exactly how high the costs would be. "But the bitter news is it will certainly be a few hundred euros (extra) per household".

Habeck said it was a "difficult step that entails a high burden".

The levy will be decided at the end of August. 

'You'll never walk alone'

As the Local has been reporting, Russia has been slashing gas deliveries to Europe. Before Russia's war on Ukraine, Germany relied on Russia for 55 percent of its natural gas. Germany has reduced its dependence, but still relies on Russia for more than a third of its gas.

Around half of all homes in Germany are heated with gas.

In view of the situation on the gas market, the levy is needed to maintain the gas supply in the coming winter, said experts.

"Without it, gas suppliers throughout the supply chain would be at risk," the Economy Ministry said. 

READ ALSO: ‘Difficult winters ahead’: Germany sets out emergency energy saving measures

The levy will be the same amount for all suppliers. Details are to be regulated in an ordinance based on the Energy Security Act, which is set to be passed in the cabinet soon. 

While announcing last week that the government was set to bail out German gas giant Uniper, Chancellor Scholz also pledged to put in place more energy relief measures for households to cushion the burden.

“You’ll never walk alone,” Scholz said in English.

READ ALSO: Scholz promises more energy relief measures as bills rise

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