Oil & Gas

31 Oct 2022

Germany Set to Attach Conditions to Gas Price 'Brake', Sources Say

31 Oct 2022  by   

A gas meter is pictured in a cellar of a home in Bad Honnef near Bonn, Germany, January 4, 2022 as energy costs in the EU are rising. REUTERS/Wolfgang Rattay

The German government is likely to insist companies that benefit from a planned "brake" on gas prices meet conditions, such as staying in the country or preserving 90% of the jobs they provide for a year, sources familiar with matter told Reuters.

Berlin last month set out an energy relief package, including a gas price brake and a cut in fuel sales tax to help households and small and medium-sized business (SMEs).

The brake, which sets a certain price, differs from attempts to cap market prices, a measure the European Union has debated for weeks and been unable to agree, in part because of opposition from Germany that says it could make it harder to source supplies.

Berlin has meanwhile defended its energy relief package as beneficial to all of Europe because it shores up the region's largest economy.

A German expert commission charged with drawing up plans to ease the impact of gas prices met from midday on Friday until well past midnight and set out proposals for specific conditions to attach to the brake, one industry source and one source close to the commission said, asking not to be named.

The government is expected to accept many of the commission's proposals once finalised, the sources said.

The proposed conditions of saving jobs and staying in Germany follow warnings from unions and lobbies that many of the small and medium-sized firms that form the backbone of German industry were considering relocating to cheaper jurisdictions.

Any companies that breach the conditions would have to pay back the price difference to the government.

Handelsblatt newspaper was first to report these details.

The brake will apply to 80% of households' basic consumption with a cap of 12 euro cents per kilowatt hour (Kwh) while market prices will apply for the rest of the consumption to encourage citizens to save gas, the two sources told Reuters.

The gas procurement price for some 25,000 large industrial customers will be capped at 7 euro cents per Kwh for 70% of consumption, the sources added.

Private households and small companies will benefit from the cap from March 2023 until the end of April 2024 while the measure could come into force in January for industrial customers.

In addition, the government will offer a one-off payment to gas consumers, which is expected to be paid in December and will cost the government around 12 billion euros ($11.96 billion), a draft law showed on Wednesday.

The commission has yet to agree whether companies will be allowed to pay bonuses for management or dividends for shareholders while benefiting from the cap.

($1 = 1.0037 euros)


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