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Energy For Members

German government set to scrap gas and electricity price caps

Sam Bradpiece
Sam Bradpiece - [email protected]
German government set to scrap gas and electricity price caps
The German Government is set to scrap price freezes on gas and electricity by the end of the year. (Photo by INA FASSBENDER / AFP)

Price freezes on gas and electricity sold in Germany will terminate on December 31st, following a ruling from the country's Constitutional Court.

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Price caps on gas and electricity in Germany will be "terminated at the end of the year", according to the country's Finance Minister. 

The announcement, made during an interview with Deutschlandfunk radio on Friday, means consumers are likely to see their energy bills go up, from the current limit of €0.40 per KwH for electricity and €0.12 per KwH for gas.  

The prize freeze was introduced last year to help consumers and businesses deal with rising prices triggered by the war in Ukraine. As recently as November, the Bundestag had agreed to extend the price cap through to March 31st. 

It was financed through the €200 billion Economic Stabilisation Fund (WSF), initially set up by the Government to help companies and pay for public health measures following the outbreak of the Coronavirus pandemic. 

The VAT reduction that the Bundestag had agreed for gas heating by the end of March is also in danger of being cancelled. 

Why are price caps ending?

The German Constitution limits budget deficits to 0.35 percent of GDP. This so-called 'debt brake rule' can only be circumvented in exceptional circumstances and was suspended during the pandemic. 

Earlier this month the Constitutional Court ruled that Chancellor Olaf Scholz's government had acted illegally by allocating funds initially earmarked for the pandemic response to climate sending. 

Following this shock ruling, a spokesperson for the Chancellor said “all special funds will now have to be looked at and assessed.”

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What has been the reaction? 

The SPD, one of the major parties in Germany's ruling coalition, has criticised the move to end the price freezes. 

"With the price brakes, we are giving millions of households and companies security against excessive energy prices," said deputy parliamentary group leaders Matthias Miersch and Verena Hubertz. 

Kerstin Andreae, Chairwoman of the Executive Board of the German Association of Energy and Water Industries (BDEW), also called it a "wrong decision".

"For the coming winter months, an extension would be an important signal of stability and security to consumers," she told taggeschau.de

The German Federation of Consumer Organisations (VZBZ) said  that the "current chaos surrounding the federal budget" should not be at the expense of consumers. "Private households will therefore face significantly higher prices," said Executive Director Ramona Pop.

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