Germany takes step closer to gas rationing with heightened alert

The German federal energy ministry plans to set the national gas emergency meter to the second step later today, thus allowing laws to be passed permitting utilities to pass higher costs on to consumers, with the third and final step of the scale permitting government control over distribution.

Photo: Christian Mang/Reuters/Ritzau Scanpix

German Economy Minister Robert Habeck will trigger the second stage of the country’s three-phase gas-emergency plan later on Thursday, moving Europe’s biggest economy to the “alarm” level following steep cuts in supplies from Russia, according to a person familiar with the plan.

The heightened alert gives the government the option of enacting legislation to allow energy companies to pass on cost increases to homes and businesses, while some coal-fired power plants could also be reactivated to help minimize gas consumption. The third and highest “emergency” level would involve state control over distribution.

Habeck warned Wednesday that Europe’s biggest economy should brace for a further reduction in Russian gas flows after Moscow last week slashed deliveries on its main pipeline to Europe. He is due to make a statement at 10 a.m. in Berlin.

Dutch front-month gas futures, the European benchmark, rose 1.7% to EUR 129.30 per MWh in Amsterdam. The contracts have gained more than 50% since state-owned gas giant Gazprom PJSC cut flows on the key Nord Stream pipeline by about 60%.

Germany, which relies on Russia for more than a third of its gas supplies, enacted the initial “early warning” phase at the end of March, when the Kremlin’s demands for payment in rubles prompted Germany to brace for a potential cutoff in supply.

Habeck, who is also the vice chancellor in the ruling coalition, has said Russia’s move to cut gas deliveries through the Nord Stream pipeline by about 60% was politically motivated and aimed at unsettling the markets.

The government’s latest move comes as Germany rushes to fill up gas-storage facilities, which are currently around 58% full. Energy companies have been building stocks to try to reach a government-mandated target of 90% capacity by November to help see the nation through the winter.

Germany’s federal network agency, Bundesnetzagentur,would implement rationing if the government triggers the emergency level. The Bonn-based agency has said leisure venues would likely see supply cuts, while consumers and critical public services such as hospitals would be protected.

Gas is a crucial part of Germany’s energy mix and more difficult to replace than Russian coal and oil, which are being phased out by the end of the year. Some 15% of Germany’s electricity is generated from gas, which is also critical for heating homes and for industrial processes in the chemicals, pharmaceuticals and metals sectors.

Germany has taken steps to secure supplies, including taking control of a local Gazprom subsidiary, which was renamed Securing Energy for Europe GmbH. The country is also building infrastructure to import liquefied natural gas from the US and other suppliers.

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