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Germany looks to extend energy price cap until April 2024

The Local Germany
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Germany looks to extend energy price cap until April 2024
Euro notes in an electricity adapter. Electricity prices soared in the wake of the Ukraine was. Photo: picture alliance/dpa/dpa-tmn | Andrea Warnecke

German Economics Minister Robert Habeck (Greens) wants to extend the price cap on gas and electricity until next Easter, offering households three extra months of energy relief.

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Despite falling energy prices in previous months, Habeck said the price caps could act as an precautionary measure to protect consumers from steep price hikes come winter.

"The price brakes act like an insurance against rising prices," the Greens politician told the Augsburger Allgemeine newspaper. "I advocate that we extend them again, until the end of winter - or to be more precise, until Easter."

Initially brought in last spring, the price caps ensure that energy prices are set a maximum of 12 cents per kilowatt hour for gas and a maximum of 40 cents per kilowatt hour for electricity.

Costs that exceed the cap are mostly covered by the government, though if households use more than 80 percent of their average annual consumption, they once again pay market prices.

The legislation was brought in to combat soaring energy costs in the wake of Russia's invasion of Ukraine. However, since early 2023, most new energy contracts have offered prices well below the cap.

READ ALSO: Why people in Germany are being advised to switch energy suppliers

"If prices fall and are below the cap of 40 cents for electricity or twelve cents for gas for private consumers, then you don't need the brakes," Habeck acknowledged. 

However, they could act as a useful "safeguard" against unexpected turbulence, he added. 

Negotiations with the EU

With Germany pouring billions into energy relief for households and businesses, the country has been treading a fine line on the European Union's state aid rules.

These stipulate that member states shouldn't create unfair competition in the single market by subsidising key industries.

In his interview with the regional Augsburger Allgemeine, Habeck revealed that he was already in talks with the EU Commission on extending the price cap. 

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"We made €200 billion available last year to cushion the energy price shock," the Economics Minister explained. "With some success, the markets have stabilised. That is why we have only had to spend around €18 billion on price brakes so far."

The Economics Ministry has also posited the idea of a standardised electricity price for industry that could act as a bridging measure while costs are still high.

So far, however, the federal government has not agreed on the project.

READ ALSO: Germany considers electricity price cap for industry

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