EnergyWatch

Germany plans EUR 54bn package to contain energy cost surge

Europe’s largest economy, heavily burdened by the ongoing energy crisis and soaring costs, plans a series of interventions worth EUR 54bn to aid commerce and residents struggling to pay bills in the fallout of Russia’s war and weaponization of energy resources.

Photo: Michele Tantussi/Reuters/Ritzau Scanpix

Germany will introduce a cap on gas and electricity prices for companies and households next year as Europe’s largest economy seeks to contain the fallout from Russia’s moves to slash energy supplies.

The package of measures, which will cost the government about EUR 54b,, will go into effect on March 1, according to government officials. The subsidies will be paid retroactively for January and February, and gas consumers will also receive a one-time state subsidy for December, said the officials, who asked not to be identified in line with briefing rules.

The aid for power bills will be partly financed by a windfall tax on electricity profits, which the government expects to raise a double-digit billion-euro amount, the officials said on Tuesday. Many companies have warned that the tax, which will be imposed retroactively to September, could impact investments in the sector.

Germany is the epicenter of Europe’s energy crisis. Decades of building up a reliance on Russia backlashed after the Kremlin slashed deliveries in evident retaliation over sanctions related to the war in Ukraine. Chancellor Olaf Scholz’s administration has implemented a series of steps to secure supplies to make it through the winter.

For private households, gas prices will be capped at 12 euro cents per kilowatt hour for 80% of consumption, based on last year’s usage levels. For industrial consumers, 70% of gas consumption will be subsidized. Power prices will be capped at 40 euro cents per kWh.

The start of price brakes in March might mean a relief for energy companies, which have said it would be unfeasible to organize operations in short notice until January, as first planned by the government.

Earlier plans by Federal Minister for Economic Affairs and Climate Action Robert Habeck to prohibit bonus payments for companies in return were dropped.

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