High energy prices are a burden for many households and companies. The federal government now wants to implement proposals from a commission. Shortly before consultations with the federal states, the federal government presents key points. It’s a matter of many billions.

The federal government wants to partially close a “winter gap” until the planned gas price brake for households takes effect in the spring. The gas price brake should take effect from March. “In addition, retrospective relief as of February 1 is being sought,” says a government paper published on Tuesday. This is planning an extensive package of measures to relieve electricity and gas customers. Energy price brakes are to apply until April 30, 2024.

The federal government wants to implement the proposals of an expert commission. On Wednesday, Chancellor Olaf Scholz (SPD) will advise the heads of government of the federal states on open financial issues in the event of relief. It is about the housing benefit and local transport. Politicians from the federal states had criticized that the planned gas price brake from March would come too late. An overview:

Households and small businesses are to receive a guaranteed gross gas price of 12 cents per kilowatt hour for 80 percent of their current consumption. The contract price should apply to the remaining 20 percent of consumption. For district heating, the guaranteed gross price should be 9.5 cents.

The annual consumption forecast on which the advance payment for September was based should apply as the previous year’s consumption. According to a paper from the Chancellery, prices for new gas procurement contracts average around 21 cents per kilowatt hour because of the Russian war of aggression in Ukraine. The monthly relief from the price brake should not have to be repaid, even if the actual consumption is well below 80 percent of the previous year’s consumption. This should give an incentive to save energy.

For households with higher incomes, the relief is to be taxed as a non-cash benefit from 2023. The expert commission had given an income of more than 75,000 euros a year.

A gas price brake is also planned for industry, starting in January. These large consumers should receive a guaranteed price of 7 cents per kilowatt hour net for 70 percent of their previous consumption, based on consumption from November 2021 to October 2022. Then there are taxes and duties. The industrial gas price brake should apply to around 25,000 companies and 1,900 hospitals.

So far, a one-time payment has been planned to bridge the gap until the gas price brake is reached – the federal cabinet wants to pass a corresponding draft law on Wednesday. It is unclear how the further relief that has now been announced will look like. A spokesman for the municipal utility association VKU said that the complex second stage of the gas and district heating price brake from March to January or February could not be implemented so quickly from a technical point of view. “However, if politicians are aiming for retrospective relief for February, then this must be as general and simple as possible.”

For the “emergency aid” in December, end consumers of natural gas will no longer be obliged to make the contractually agreed advance or down payment. The relief is to be calculated on the basis of the annual consumption forecast including September and the gas price for December.

The following is planned for tenancies: Many landlords have not yet adjusted the monthly advance payment to the increased energy prices. Therefore, the higher prices would reach the tenants as part of the utility bill for this year, which will not be prepared until the following year, 2023. Therefore, landlords should pass on the relief to tenants with the next annual utility bill. They thus benefited from the relief at the time when they would have to bear the entire price increase for 2022 through any additional payments. However, within the federal government it was considered possible that tenants who were already paying higher deductions would be relieved as early as December.

An electricity price brake is to take effect from January. As with the gas price brake, a basic quota of 80 percent of previous consumption for a gross price of 40 cents per kilowatt hour is to be made available for households. The historical consumption should probably be based on the annual consumption forecast.

According to the comparison portal Verivox, the nationwide electricity price currently averages 48.16 cents per kilowatt hour. For a three-person household with an annual consumption of 4000 kilowatt hours, the current annual costs would be around 1926 euros per year on this basis. With the planned cap, the total annual costs would fall by around 14 percent to 1665 euros. This corresponds to a relief of around 260 euros per year.

The federal government is also planning an electricity price brake for industrial companies. They should get a guaranteed net price of 13 cents per kilowatt hour for a basic electricity quota of 70 percent of historical consumption, which is based on annual consumption for 2021. Industry is to be promoted in compliance with European state aid law.

To co-finance the electricity price brake, “accidental profits” from companies on the electricity market are to be skimmed off retrospectively from September 1st. This affects producers of green electricity from wind and sun, for example, who have recently benefited from high prices on the stock exchange. The background to this is the sharp rise in gas prices and the pricing mechanism on the electricity market. The revenue generated from the levy is estimated to be in the tens of billions.

According to the paper, the electricity price brake for households and small companies is expected to cost between 23 and 33 billion euros. The funds required for the industrial electricity price brake are estimated at another 30 to 36 billion euros. The federal government estimates that the gas price brake will cost more than 30 billion euros.

The costs depend on the further development of prices and consumption. By far the largest part of this relief is to be financed via a “defense shield” with a volume of up to 200 billion euros, with the federal government incurring new debts.

A hardship fund should also have a volume of 12 billion euros. Regulations are planned for consumers and small and medium-sized companies that are not sufficiently relieved by the price brakes – according to the paper, this should also apply to housing companies as well as hospitals, care facilities or cultural institutions. Grants and loans are planned. Details on the exact application conditions are open. According to the paper, the federal government is also striving for a hardship regulation for owner-occupied residential property, where the stockpiling of other heating materials such as oil and wood pellets leads to “unreasonable burdens”.