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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.

Cash on a radiator in Germany.
Cash on a radiator in Germany. Photo: picture alliance/dpa/dpa-Zentralbild | Patrick Pleul

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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ENERGY

Norway and Germany seek Nato-led cooperation for key undersea structures

Germany and Norway want to start a NATO-led alliance to protect critical underwater infrastructure, their leaders said on Wednesday, weeks after explosions hit two key gas pipelines in the fallout from the war in Ukraine.

Norway and Germany seek Nato-led cooperation for key undersea structures

 “We are in the process of asking the NATO Secretary General to set up a coordination office for the protection of underwater infrastructure,” German Chancellor Olaf Scholz told a press conference in Berlin.

“We take the protection of our critical infrastructure very seriously and nobody should believe that attacks will remain without consequences,” he said.

Norwegian Prime Minister Jonas Gahr Store said the alliance would be “an informal initiative to exchange between civilian and also military actors” with NATO providing “a centre, a coordination point”.

Underwater cables and pipelines were “arteries of the modern economy” and it was necessary to create “a coordinated joint effort to ensure security for this infrastructure”, he said.

Scholz said he and Store would propose the plan to NATO Secretary General Jens Stoltenberg, who is due in Berlin for a security conference. The Nord Stream 1 and 2 gas pipelines off the Danish island of Bornholm were targeted by two huge explosions at the end of September.

The pipelines, which connect Russia to Germany, had been at the centre of geopolitical tensions as Moscow cut gas supplies to Europe in suspected
retaliation to Western sanctions over the invasion of Ukraine.

Although they were not in operation when the leaks occurred, they both still contained gas which spewed up through the water and into the atmosphere.

Russia and Western countries, particularly the United States, have traded bitter barbs over who is responsible for the blasts.

Several European countries have since taken steps to increase security around critical infrastructure. 

The G7 interior ministers warned earlier this month at a meeting in Germany that the Nord Stream explosions had highlighted “the need to better protect our critical infrastructure”.

Norway has become Europe’s main gas supplier in the wake of the war in Ukraine, taking the place of Russia.

The Scandinavian country has a vast network of pipelines, stretching for almost 9,000 kilometres, linking it to the continent, which experts have said are at risk of sabotage.

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