Energy crisis to labour shortage: Five challenges facing Germany right now
A draft law shows that Germany is preparing to bring in a Gasumlage – or levy – aimed at relieving the pressure on struggling suppliers by allowing them to pass on nearly all the extra costs of soaring gas import prices to consumers.
About half of all homes in Germany are heated with gas. The levy will apply to all gas customers, from private households to companies. It will even apply to people with long-term contracts who have already agreed a fixed price payment.
READ ALSO: Why households in Germany will soon face gas bill hikes
What cost increases will gas customers face?
The ‘tax’ will make gas prices more expensive. However, the exact amount of the levy will not be revealed until the middle or end of August, according to sources in the government.
The Economy and Climate Minister, Robert Habeck, of the Greens, said on Thursday that the levy could be anywhere in the range of 1.5 to 5 cents per kilowatt hour. For comparison, household customers paid an average of 6.68 cents per kilowatt hour of gas in 2021, according to the Federal Network Agency.
A much-cited calculation example of how the levy would affect customers assumes that an average four-person household consumes 20,000 kilowatt hours a year.
In this case, the extra costs would probably amount to between €300 and €1,000 per year. But Spiegel pointed out that’s this is not the end of the calculation – there is also the value-added tax. With tax, the additional costs in this example would be between €357 and €1,190.
Last week, Chancellor Olaf Scholz had spoken of lower costs. If gas prices were increased by two cents per kilowatt hour, a family of four would have to pay an additional €200 or €300 a year, Scholz had said.
However, the additional costs do not end with the levy. Experts expect that the suppliers will gradually raise their prices anyway due to the demand on the market – and that the costs will also be high in the coming years. The levy will be on top of these general price hikes.
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What does the amount of the levy depend on?
It depends largely on what gas importers report to the government. The government will also consider the impact on customers while calculating the surcharge.
The draft plan is for importers to be able to pass on 90 percent of the higher procurement costs. The same amount per kilowatt hour is to apply to all customers, regardless of where they concluded their contract.
Details are to be regulated in an ordinance based on the Energy Security Act, which is set to be passed in the cabinet soon.
Robert Habeck, Federal Minister for Economic Affairs and Climate Protection. Photo: picture alliance/dpa | Soeren Stache
When is the levy likely to come in – and for how long?
According to initial proposals, the levy will come into force on October 1st and, as things stand at present, will apply for one and a half years, i.e. until the end of March 2024.
Until the end of September this year, importers will have to bear the extra costs themselves.
Why is this happening?
Russia has been slashing gas deliveries to Europe, which has created a dramatic energy crisis. Before Russia’s war on Ukraine, Germany relied on Russia for 55 percent of its natural gas. Germany has reduced its dependence, but still relies on Russia for more than a third of its gas.
In view of the situation on the gas market, the government says the levy is needed to share the additional costs for replacing gas from Russia.
READ ALSO: Germany must use less gas, warns regulator
Who benefits from the levy?
The levy is intended to relieve firms affected by the cuts in Russian gas supplies, and this is supposed to stabilise the economy.
“Without it, gas suppliers throughout the supply chain would be at risk,” the Economy Ministry said on Thursday.
Economy Minister Habeck promised that the information provided by the companies would be closely examined. “It will also be recalculated,” Habeck said. “So we will prevent any possible wrong-doing from happening there.”
During a visit to companies in Bad Lauchstädt in Saxony-Anhalt on Thursday, Habeck said the levy would support importers and suppliers, allowing them to earn money again, and the danger of bankruptcy could be averted. “In any case, we assume that this levy mechanism will calm the market and stabilise the companies,” he said.
What financial support is being given to ordinary people?
The German government has already brought in a number of relief measures to cushion the rising cost of energy prices, including the €9 ticket and the fuel tax cut (both run for three months until the end of August).
Furthermore, there’s a payment of €300 – known as the Energiepreispauschale – going to all taxpayers from September. Keep in mind that it is subject to tax for most people.
There’s also been targeted support for families, such as the Kinderbonus given out in July, and extra payments to people on benefits.
Chancellor Scholz said last week that there would be more financial support coming for people in Germany.
Although the details are not known, the government has talked about extra support for the most vulnerable in society, including pensioners and people on benefits.
Tenants who get into financial difficulties because of high energy costs are also to be legally protected, according to Scholz. Other measures are being discussed.
Plus, against the background of high inflation, Finance Minister Christian Lindner (FDP) has brought a tax cut and higher child benefits into play so these are possibilities.
READ ALSO: How much money will you get from Germany’s energy relief measures?
A gas flame on a stove. Photo: picture alliance/dpa | Marijan Murat
What can consumers do now?
Experts say that people should be aware of the higher costs and cut down on energy usage.
“Put money aside and save energy,” said Udo Sieverding, energy expert at the consumer advice centre in North Rhine-Westphalia. He believes it is possible that instalments could soon be tripled or quadrupled.
Kerstin Andreae, Chairwoman of the Executive Board of the German Association of Energy and Water Industries (BDEW) said: “The more gas that is saved today, the more we can use for storage.”
“Prices will remain high for a long time,” economist Veronika Grimm told Spiegel, underlining that Germany is in it for the long haul.
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The German Technical and Scientific Association for Gas and Water (DVGW) recommends people consider extensive measures such as hydraulic balancing of heating systems and maintenance wherever possible to keep things in tip-top shape.
Some associations advise against fan heaters, however. Not only are they expensive, but in the worst case they could lead to local power cuts in winter.
Other energy-saving measures including turning off the heating at night and when away from home, leaving rooms that are not used often cooler, taking showers instead of baths (and making them slightly less hot), installing energy-saving shower heads and heating thermostats, and reducing temperatures in your home by a few degrees.
READ MORE: 8 simple ways you can save on heating costs in Germany