Brussels has the final say
Energy price brakes will be extended until March
October 11, 2023, 3:49 p.m
After the rise in energy prices as a result of the Russian attack on Ukraine, the federal government capped energy prices for certain quantities. This regulation will now be extended over the coming winter. The corresponding pot is still two-thirds full.
The federal government is aiming to extend the price caps for electricity, gas and district heating by three months, but still needs the green light from Brussels. Prices should remain capped for basic consumption until the end of March 2024, government circles said. The state would continue to pay the difference. However, the approval of the EU competition authorities is still missing for the final decision. “The federal government is currently negotiating intensively with the EU Commission,” explained a spokesman for the Federal Ministry of Economics.
As things stand, the price brakes will expire at the end of December. However, the law already included an extension until the end of April. Economics Minister Robert Habeck and Finance Minister Christian Lindner had spoken out in favor of using this opportunity. Economists and consumer advocates also supported this. The extension is now one month shorter than planned.
The price cap for gas is 12 cents per kilowatt hour for private households, for district heating it is 9.5 cents and for electricity it is 40 cents. The comparison portals Verivox and Check24 state that new customer tariffs for electricity and gas outside of the basic supply have long since fallen below these values. They therefore called for the measure to be phased out as planned, as the cap prevents customers from switching – at the expense of the taxpayer.
So far, price controls have cost 32 billion euros
Meanwhile, the cabinet decided to raise the VAT on gas back to the regular rate from January. However, Lindner’s plan still has to be decided. Specifically, the cabinet approved the wording aid with which the Growth Opportunities Act – a tax package to relieve the burden on small and medium-sized companies – is intended to be supplemented in the ongoing parliamentary process.
Because of the high energy prices after the Russian attack on Ukraine, the federal government temporarily reduced the VAT rate from 19 to 7 percent, thereby making gas cheaper. This special regulation is now set to expire three months earlier than planned at the turn of the year. As a result, experts expect gas prices to rise again in the middle of the heating season. The Finance Ministry said the reduction was only ever planned as a short-term relief. Prices have recently fallen faster than expected and the energy market has calmed down.
For the state coffers, the earlier return to the higher tax rate should mean around 2.1 billion euros more tax revenue. However, the energy price brakes would continue to hit the bill. So far they have cost the state around 32 billion euros, according to the Federal Ministry of Finance. This means that only a third of the budget of more than 91 billion euros has been exhausted.