Germany's gas surcharge plans face legal hurdle
Germany wants to bail out its struggling energy sector with a new gas levy in October - but legal rules around fixed-price contracts are causing headaches for the government.
The government has said that all gas customers in Germany have to pay the levy, and this was believed to include people who had entered into fixed-price contracts with gas suppliers.
But the legal status of this is apparently murky. According to reports by news agency Reuters, the current Energy Security Act (ESG) only allows a levy to be added to fixed-price contracts if the proceeds go directly to the state.
In this case, however, the government intends to use the levy to allow struggling gas suppliers to pass rising costs onto consumers, meaning the funds would be paid directly to these companies.
The issue means that, under current rules, the levy couldn't be charged to customers with certain types of gas contracts. These include people who have agreed to a fixed price over several years and those with clauses on state levies in their contracts.
Reuters estimates that the issue affects around a quarter of all gas contracts in Germany.
READ ALSO: What is Germany’s new gas ‘tax’ and who will pay it?
To attempt to get around the issue, the Economics Ministry is currently investigating the legal pitfalls and could even move to amend the Energy Security Act.
This legislative change would be likely to happen in September to allow for the introduction of the levy as planned in October.
However, there are concerns that suppliers may not have enough time to notify consumers of the new levy.
Under German law, companies are obliged to inform customers of price increases at least six weeks in advance. This means that any legal changes could prompt delays in the introduction of the new charge.
Financial burden for households
So far, the government hasn't decided how much the levy will cost, but Economics Minister Robert Habeck (Greens) predicts it will be somewhere between 1.5 and 5 cents per kilowatt hour of energy.
This would add anywhere between €300 and €1,000 onto the gas bills of a four-person household who use around 20.000 kilowatt hours of energy per year.
On top of this, households would also be expected to pay 19 percent VAT on top of the inflated costs - though the Free Democrats (FDP) are currently looking at ways to minimise this additional burden.
"The levy must not be a basis for further tax revenue - that is why we are currently examining whether VAT can be waived on the levy," said the energy policy spokesman of the FDP parliamentary group, Michael Kruse, after a special session of the Bundestag's energy and climate committee.
READ ALSO: Cold showers to turning off lights: How German cities are saving energy
"Should this not be technically possible, it is clear to me that the additional state revenue must be returned to consumers along with further relief."
According to calculations by price comparison portal Verivox, the additional costs including VAT for a single household with an annual consumption of 5,000 kilowatt hours of gas per year would be between €89 and €298 due to the levy.
For a couple with an annual consumption of 12,000 kilowatt hours, the additional costs plus VAT would be between €214 and €714, and for a four-persona family with an annual consumption of 20,000 kilowatt hours, the total would be €357 to €1,190 euros.
However, if the VAT on gas products were abolished, a single household would save between €14 and €48, a couple between €34 and €114 and four-person household between €57 and €190.
Comments (1)
See Also
The government has said that all gas customers in Germany have to pay the levy, and this was believed to include people who had entered into fixed-price contracts with gas suppliers.
But the legal status of this is apparently murky. According to reports by news agency Reuters, the current Energy Security Act (ESG) only allows a levy to be added to fixed-price contracts if the proceeds go directly to the state.
In this case, however, the government intends to use the levy to allow struggling gas suppliers to pass rising costs onto consumers, meaning the funds would be paid directly to these companies.
The issue means that, under current rules, the levy couldn't be charged to customers with certain types of gas contracts. These include people who have agreed to a fixed price over several years and those with clauses on state levies in their contracts.
Reuters estimates that the issue affects around a quarter of all gas contracts in Germany.
READ ALSO: What is Germany’s new gas ‘tax’ and who will pay it?
To attempt to get around the issue, the Economics Ministry is currently investigating the legal pitfalls and could even move to amend the Energy Security Act.
This legislative change would be likely to happen in September to allow for the introduction of the levy as planned in October.
However, there are concerns that suppliers may not have enough time to notify consumers of the new levy.
Under German law, companies are obliged to inform customers of price increases at least six weeks in advance. This means that any legal changes could prompt delays in the introduction of the new charge.
Financial burden for households
So far, the government hasn't decided how much the levy will cost, but Economics Minister Robert Habeck (Greens) predicts it will be somewhere between 1.5 and 5 cents per kilowatt hour of energy.
This would add anywhere between €300 and €1,000 onto the gas bills of a four-person household who use around 20.000 kilowatt hours of energy per year.
On top of this, households would also be expected to pay 19 percent VAT on top of the inflated costs - though the Free Democrats (FDP) are currently looking at ways to minimise this additional burden.
"The levy must not be a basis for further tax revenue - that is why we are currently examining whether VAT can be waived on the levy," said the energy policy spokesman of the FDP parliamentary group, Michael Kruse, after a special session of the Bundestag's energy and climate committee.
READ ALSO: Cold showers to turning off lights: How German cities are saving energy
"Should this not be technically possible, it is clear to me that the additional state revenue must be returned to consumers along with further relief."
According to calculations by price comparison portal Verivox, the additional costs including VAT for a single household with an annual consumption of 5,000 kilowatt hours of gas per year would be between €89 and €298 due to the levy.
For a couple with an annual consumption of 12,000 kilowatt hours, the additional costs plus VAT would be between €214 and €714, and for a four-persona family with an annual consumption of 20,000 kilowatt hours, the total would be €357 to €1,190 euros.
However, if the VAT on gas products were abolished, a single household would save between €14 and €48, a couple between €34 and €114 and four-person household between €57 and €190.
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.