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How much extra will households in Germany pay under new gas surcharge?

With a new gas levy set to come info force in October, experts have been looking at how much more people will have to pay - even if they've already agreed contracts. There are also calls for everyone, including non-gas customers, to contribute.

Money lies on a radiator.
The German government is set to announce its biggest relief package yet ahead of a hard winter of soaring energy costs. Photo: picture alliance/dpa | Patrick Pleul

What’s happening?

As The Local has been reporting, the German government has put together a draft law which will see a ‘Gasumlage‘ – or levy – brought in to prop up struggling suppliers by allowing them to pass on nearly all the extra costs of soaring gas import prices to consumers. 

According to the initial draft, the levy is expected to apply from October 1st 2022 until April 1st 2024. It’s not clear if costs will reach consumers immediately, but bills will rise significantly as a result of the levy. 

READ ALSO: What is Germany’s new gas ‘tax’ and who will pay more?

Who is affected?

Everyone who uses gas to heat their home or business is affected by the new levy. The charge applies even when customers have already signed contracts where a fixed monthly payment is agreed. About half of all homes in Germany use gas for heating and/or hot water.

Wait – so ordinary people now have to pay for the gas supply problems?

Basically – yes. As Russia has been cutting down supplies, the German government says the levy is needed to share the additional costs for replacing the gas.

Under the Energy Security Act, 90 percent of the additional purchase costs of securing gas will be passed on to all gas consumers from October.

If, for instance, Uniper – the largest gas trader in the country – no longer gets enough gas and therefore has to buy on a daily basis and pays three times as much for this resource, then all gas gas consumers in Germany will bear 90 percent of this cost.

READ ALSO: Why households in Germany will soon face gas bill hikes

What cost increases will these gas customers face?

The ‘tax’ will make gas prices more expensive, although, we won’t know the exact amount of the levy until the middle or end of August.

However, we do have an idea of how much the rising costs will be. Energy and Climate Minister Robert Habeck said last week that the levy could be anywhere in the range of 1.5 to 5 cents per kilowatt hour.

For many consumers, this will be an enormous challenge.

A person changing the heating setting on a radiator. The coalition has pledged financial support people in Germany.

Heating prices are going up. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

According to calculations by the internet portal Check24, a one-person household with an annual consumption of about 5,000 kilowatt hours would have to pay between €89 and €298 a year for the levy alone, while a family with a consumption of 20,000 kilowatt hours would have to reckon with additional costs of €357 to €1,190.

Many consumers who have a price guarantee in their contracts may think they won’t have to pay the levy – but they are wrong, warns Udo Sieverding, energy expert at the North Rhine-Westphalia Consumer Advice Centre.

That’s because this guarantee does not protect against state surcharges or levies. “Everyone has to pay,” says the consumer advocate, regardless of their contract or deal with a supplier. 

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

Is it unfair to make gas consumers – and not all households – pay the levy?

The price hike only affects gas customers in Germany. So people whose heating or hot water comes from different sources – such as heat pumps or electricity – will not have to pay it. 

However, gas customers have already been dealing with extremely high prices on new contracts recently. Since July last year, prices for a family household have risen from €1,300 to €3,415 a year. 

Including a levy of five cents per kilowatt hour, a household would have to pay an average of €4,605 – 254 percent more than in July 2021.

Sieverding, of the Consumer Advice Centre, thinks this isn’t fair – and Germany should look at introducing tax increases instead of just making gas consumers pay.

“It’s about solidarity for society as a whole, and tax increases would make more sense than a levy,” he said. He also fears that more and more fan heaters will be plugged into the sockets in winter, putting a strain on the electricity grid.

READ ALSO: Should I invest in an electric heater in Germany this winter?

Why do only gas customers have to pay?

According to German media, gas is the scarcest commodity among the energy sources, and the practical implementation of passing the costs onto gas consumers is much easier than putting in place a general tax on everyone.

Plus: a levy that affects everyone is a serious intervention that has to be proportionate and legally secure.

Isn’t Germany meant to be taking the heat off ordinary people?

Yes. The German government has been trying to cushion the blows of rocketing energy prices and subsequent rising inflation. It has taken measures such as introducing the €9 ticket and a fuel tax cut for three months, giving out a Kinderbonus to children in July and is set to give a taxable €300 payout to people in employment from September – and even got rid of the EEG levy on electricity earlier than planned.

So it seems strange that it is actually bringing in a new levy. However, it reflects the dire situation that Germany is in. Having relied on cheaper Russian gas imports for decades, now the country is having to scramble around to find other sources – and ordinary households are paying the price of political decisions and Russian President Vladimir Putin’s actions. 

READ ALSO:

What are businesses saying?

As you can imagine, they are concerned too. The Federation of German Industries has argued for a price cap, or an opportunity to pay in staggered amounts.

“Otherwise, the gas levy threatens to massively undermine the competitiveness of companies,” the association said. 

The German Energy Industry Association, however, welcomes the levy as a measure to pass on replacement costs quickly and “to preserve the liquidity of the energy supply companies”.

The association also highlighted that the charges “are levied equally on all consumers and without privileging certain customer groups”. This allows for a transparent calculation of the levy and a fair distribution of the burden, they said.

Member comments

  1. I am at a loss. Is this pure incompetence or corruption, or both?

    Im so angry that big companies are bailed out and can impose this levy on customers all whilst their profits soar. Dividends are being raised and have been given out throughout this year. But they need protection while average Jo is given a 300€ taxable payment to which is paid for by taxes you’ve already paid and the promise of help somepoint in 2023. Its about time this government actually governed rather than pandering to whoever is lining their pockets.

    Open nord stream 2, keep the nuclear plants open. Drop this green agenda rubbish. We need power and gas now, not in 5 or 10 years time. And as for what ever Mr Vouge thinks or says who cares. He’s not incharge of German foreign policy. (As much as I am a critic of German policies. We are here now going like we are now is going to be disastrous, so much so we haven’t seen anything yet.)

  2. How does this affect me if I have a subletter contract? In the time I’ve been in my flat (mostly during Corona where we work from home — so we are using more gas and electric since the company does not have us in the office…). My costs have been raised at least once. And I’ve been warned by the person I sublet from that it may raise again. I’m assuming I just must accept this, but is there any way to clarify this before it hits my monthly budget?

  3. I find it difficult to believe “ordinary”, grown people don’t accept that higher gas prices will obviously hit them as they are the consumers. If a business has to pay more for something, of course the customer bears the brunt. Businesses are not charities.

  4. I dont have a reply button but my comment box has a notify me if anyone answers my comment?

    Lyssa77 . I normally follow your train of thought there, businesses are not charities but I draw the line at energy, water and housing. These 3 should never be run for profit. The companies that run these sectors usually have a monopoly. Which under the right circumstances can be dangerous. ( Berlin housing problem). In terms of energy right now we are in a very precarious place. The government refuses to open nord stream 2, this would flood Germany with all the gas it needs and return prices to lower levels. So the price hikes are nothing to do with normal market conditions but they are however government policy.

    Sholz then proceeds with this whole walking together bull. Then allows 90% (confirmed by Uniper the government intends this to be 90% it was used as part of their consideration for the profit stabilisation scheme) of costs to be passed on thus making energy bills cost as much as rent does. All the while companies like RWE are adjusting their profit forecast for 2022 from 3.6 to 5.5 billion in profits. Uniper are bailed out with taxpayers money less than 2 months after paying out over 25 million euros in dividends and they too are raising costs. RhienEnergie is doubling its prices before placing the levy on top. They posted 1,12 billion in profit.
    While profits soar and tax payers money flows to the tune of up to 14 billion euros is it morally acceptable for the consumers to bear the brunt of a levy As well? I am not sure i like Sholz’s idea of together.
    People need gas to live. We don’t have a choice but to pay these prices. Theres a difference between running a business and openly price gauging. To me with the evidence I see before me. Its price gauging and its government sanctioned.

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ENERGY

Germany to thrash out details of €200 billion energy support package

Chancellor Olaf Scholz is meeting with Germany’s 16 state leaders on Tuesday to work out the details of the country’s energy relief packages and a cap on the price of gas. But a few questions remain open.

Germany to thrash out details of €200 billion energy support package

What’s happening?

With power bills more than doubling in some cases, German federal and state leaders have decided more support is needed. Chancellor Scholz last week announced a €200 billion package to cushion the blow for people in Germany yet further.

One of the most expensive planned measures is a Gaspreisdeckel – or a cap on the price of gas households would pay this winter.

That comes on top of a combined €100 billion in relief spending over three spending packages already passed in the Bundestag. The last one, amounting to €65 billion, was passed only about a month ago.

Those packages are paying or have paid everything from the popular €9 nationwide public transport ticket, a VAT cut on gas bills, to one-off energy and cost of living relief payments.

But that wasn’t enough for many state leaders, who began calling for a gas price cap.

READ ALSO: KEY POINTS: Everything Germany is doing to help relieve rising energy costs

These calls also come from across the German political spectrum.

Both Markus Söder, the Bavarian premier from the conservative Christian Social Union (CSU) and Berlin mayor Franziska Giffey of the Social Democrats, have been particularly vocal in their support for a gas price cap.

Is a gas price cap coming?

Households in Germany are very likely to see a cap on their gas bills of some sort this winter.

What’s not clear yet – and what federal and state leaders are hammering out Tuesday – is how precisely it will work in practice, when it might come in, how long it will last, and how it’ll be paid for.

The SPD-led government of Mecklenburg-West Pomerania and national Green co-leader Ricarda Lang want a gas price cap that would cover 80 percent of what households use.

German state leaders attend the conference on Wednesday.

German state leaders attend a conference. Photo: picture alliance/dpa | Bernd von Jutrczenka

Under a plan like that, 80 percent would be termed a “basic consumption” requirement and capped in price for the average consumer. The other 20 percent would float according to the market rate for gas – to help encourage people to still save energy.

Söder’s Bavarian CSU has previously advocated for a 75/25 percent split between the capped portion and the floating portion to encourage more energy saving.

The government is then on the hook to pay the rest.

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

The cap is likely to last for the winter months at least, although this depends on Tuesday’s government talks, which also cover the thorny issue of how the government intends to pay for the cap.

The German Institute for Economic Research’s Marcel Fratzscher told broadcaster RTL and ntv last week that a cap alone could cost anywhere between €30 and €50 billion.

The Scholz government wants to pay for this primarily by running up government debt, something Finance Minister Christian Lindner has reservations about, as it would mean suspending Germany’s constitutional debt brake.

The federal state governments would be expected to pay for at least some of it, and any disputes Tuesday could hamper an agreement—potentially delaying the start of any cap or further relief measures.

A €9 ticket successor and relief for small businesses. What else do Germany’s states want?

Germany’s 16 federal state leaders are also bringing in a list of other measures they want to see from Scholz’s promised €200 billion in relief spending.

Chief among these is the unresolved question of how to pay for the planned successor to Germany’s popular €9 nationwide public transport ticket this summer.

Politicians are floating the idea of a more expensive €49 ticket, although the price could reach above €60, depending on how much money federal states are willing to kick in for it along with the federal government.

READ ALSO: Germany to set out plans for €49 transport ticket in October

North-Rhine Westphalia premier Hendrik Wüst is also calling for the federal government to make more money available for refugee housing, particularly as around 1 million Ukrainian refugees have arrived in Germany since the Russian invasion began in February.

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