At the suggestion of the Gas Price Commission, Federal Minister Olaf Scholz is preparing to start the one-off measure with which the ancillary costs of all citizens are to be paid in the last month of the year. From 2023, a more structured subsidy system will be operational, with state rebates of 80% of energy consumption for families and 70% for large companies. An intervention that will cost a total of 96 billion euros
In Germany, the December bill is paid by the state. To help families and businesses fight expensive energy, Olaf Scholz’s government plans to invest over 5 billion euros in the last month of the year to meet spending on business and household users. A “one-off” move that will be followed in the spring by a more structured subsidy program that will complete the €200 billion plan announced by the executive.
The decision
deepening
After the vote: Measures against high bills, EU countries in comparison
The initiative actually goes back to a suggestion by the gas price commission, which, after 35 hours of deliberation, submitted various proposals to the executive to combat expensive energy. This also includes the payment of bills by the state, which Berlin has not yet commented on technically, but according to the German media a decision has already been made in practice. “The situation remains tense, although the reserves are almost full,” said Commission President Veronika Grimm.
phase two
deepening
Price cap because Germany does not want a petrol price cap
Instead, a so-called “petrol price cap” will take off in the coming months, not a price cap for supply costs as we understand it, but a structured system of relief and assistance. From March 2023 to the end of April 2024, households and SMEs pay 12 cents per kilowatt hour for the first 80 percent of last year’s gas consumption; the difference to the market price is set by the state. For large industries, the phase-out will be brought forward to January 1, 2023, with a 70% threshold and a subsidized price of between 7 and 9 cents. In both cases, the part that exceeds the two thresholds remains entirely the responsibility of the subject and will be valued at the normal price. Grimm himself explained the sense of moderation: “The system will create a new normal and avoid artificially restoring the low prices that were common in Ukraine before the Russian war but will not return”. Not only. “Not covering the entire need, but only a part serves to ensure an incentive to save.”
costs and benefits
deepening
Dear Energy, “Italy stands on bills like Germany”
“Although the exact expenses are difficult to predict, the proposed two-tier system could cost around 96 billion euros,” said Siegfried Russwurm, member of the gas price commission and president of the Federation of German Industries. The intervention is likely to be part of the €200 billion “defensive shield” announced in September to protect citizens from energy increases, but has never been explained in detail. As for the benefits, according to Verivox, a family consuming 20,000 kWh of gas will spend from €4,108 per year to just €2,742, with a saving of €1,366. With a consumption of around 5,000 kWh, the “discount” would instead be 342 euros, while with 12,000 kWh it would be around 820 euros.
The European front
Meanwhile, Germany is also opening up to common EU bond issuance to finance measures to support the economies of euro area countries in the face of the energy shock. Bloomberg reports, which in turn cites sources from the German executive: The working scheme in Berlin that they would like to follow would be the pandemic program Sure, with which Brussels is providing aid of up to 100 billion euros in the form of loans.
Business
Dear bills, Draghi’s last trains in Europe: from gas to energy
Three key points of the strategy: cut gas prices, start electricity reform and create a European Solidarity Fund that will facilitate governments’ economic efforts
At his penultimate summit with other European leaders in Prague, before on October 19 and 20 in Brussels, the President of the Council Mario Draghi aimed at the energy challenge. The meeting at the end of October will be the last chance to bring home a concrete result. There are three key points in his strategy: to reduce fuel pricesstart this electricity reform and get one European Solidarity Fund this facilitates the economic efforts of governments
For Draghi you need a gas price cap stop the speculators and draw the blackmail weapon against Russia. And it needs to be applied consistently across Europe, albeit in its flexible (or dynamic) form. The alternative is “save who can”. And it is a path that – according to the Italian government – would lead to devastating consequences not only for Italy but for the entire EU
The effects, they emphasize in the Palazzo Chigi, are visible in a very short time: it was enough for the EU to show its direction in Prague concrete actions that the gas price fell to 155 euros, or -12% less than the TTF index