German gas price commission proposes December handout, price cap for 2023

Germany's government-appointed gas price commission has proposed a one-off payment covering household gas bills for December, while a gas price cap for 70% of annual consumption for industry is to be applied from next year, according to an interim report presented Oct. 10.

The proposed measures are estimated to have a cost of around Eur96 billion ($93.14 billion) until April 2024 including the December handout, which is estimated to cost around Eur5 billion, the co-head of the commission and key economic advisor to the government, Veronika Grimm, said at a press conference in Berlin.

The commission, which also includes unions and industry stakeholders, was appointed after the government scrapped the gas levy that was to collect some Eur34 billion in the fourth quarter to allow gas importers to cover the gap between record-high market prices and end-user contracts after the loss of Russian gas supply.

Europe's gas price benchmark TTF front-month hit a record Eur319.98/MWh Aug. 26, but has halved since to a Eur155.10/MWh assessment Oct. 7, according to S&P Global Commodity Insights data.

German coalition leaders on Sept. 29 agreed a new Eur200 billion support package to ease pressure from energy cost hikes with details how to apply funds to be worked out by the expert commission.

Gas price caps

Siegfried Russwurm, the head of German industry association BDI and also co-head of the commission, said the gas price cap for industry would be applied to 70% of 2021 gas consumption in order to maintain demand reduction incentives.

From January, the cap for the around 25,000 companies on industrial tariffs (consumption above 1.5 TWh/year) would be set around Eur70/MWh, he added.

Household bills meanwhile are proposed to be capped at Eur120/MWh for 80% of annual demand from March 1, 2023.

The exact timing of the start of the measures, which are planned to run until April 2024, depends on how the government implements the proposals, with key ministries including finance and energy currently reviewing them.

Utility association BDEW welcomed what it described as robust proposals to help reduce gas prices significantly for households and industry while maintaining incentives to reduce demand in line with a 20% target for this winter.

European solutions

The commission's final report, due later this month, will also look at ways to reduce gas prices at a European and global level.

EU leaders at the informal summit in Prague Oct. 7 added momentum to coordinated European measures to reduce gas prices, without coming out with any specifics as yet, amid wider calls to use collective funds for such measures.

German Chancellor Olaf Scholz defended Germany's Eur200 billion support package against criticism from other EU members, but also hinted at possible collective measures.

Other domestic measures planned by the federal government in Berlin include a one-off payment to keep 2023 power grid fees at 2022 levels.

Germany is Europe's biggest consumer of gas and electricity and had been especially hard-hit by the loss of Russian gas, which met almost half of the country's demand last year.

Households and small business accounted for around 40% of 2021's roughly 1,000 TWh of gas consumption, with industry and power generation including combined heat and power plants making up the remainder.

Gas tariffs for new customers have risen from around Eur68/MWh a year ago to Eur283/MWh, the report said, based on data from price portal Verivox.

Fast-tracking floating LNG terminals, a 20% demand reduction goal and extended use of coal and nuclear reserve power plants are part of the government's emergency response to the supply crisis.

GERMAN GAS PRICE EXPERT COMMISSION: KEY PROPOSALS

Source: Gas price expert commission (interim report)