Gas crisis in Germany: New law could bring consumers a nasty surprise

Created: 06/22/2022, 17:34

By: Thomas Schmidtutz

293432900.jpg © Sebastian Iwersen/dpa

The alarm level could soon be declared in the gas emergency plan - with far-reaching consequences for consumers.

Berlin - The supply situation in Germany remains tense because of the Ukraine war: will natural gas soon become even more expensive - and without delay?

Since May 21, gas suppliers have had at least one legal option, under certain conditions, to “adjust” all of their contracts from now on, i.e. to raise the prices.

The new paragraph 24 of the Energy Security Act, called “EnSiG”, makes it possible.

But not without further ado.

Energy Security Act: sticking point paragraph 24

Essentially, the relevant paragraph is about energy suppliers not falling to their knees because of high wholesale prices and endangering the supply of their customers through insolvency.

Sometimes companies, such as municipal utilities, have to buy additional natural gas at current prices in order to be able to serve all customers.

At the same time, the income from the existing contracts may not cover these additional costs.

The legislator therefore allows them in the law under certain conditions to set new prices for all their contracts.

So that things can be done quickly in an emergency, the new prices should apply one week after the announcement.

What requirements must be met?

Two requirements must be met: Firstly, the alarm level or emergency level must have been declared in the gas emergency plan.

On the other hand, the Federal Network Agency must have determined a “considerable reduction in the total gas import volumes to Germany” on this basis.

This determination must be published in the Federal Gazette.

Only then are companies allowed to raise prices.

The law also specifies rules for the return: "As soon as the supply bottleneck no longer exists, the Federal Network Agency must lift this determination," says the Federal Ministry of Economics.

The “right to adjust prices” then lapses.

The early warning level has been in effect since the end of March.

Is the second stage coming now?

It can be.

According to media reports, the federal government is preparing to declare the alert level within a few days.

Federal Economics Minister Rober Habeck is planning the so-called alert level for July 8, the politician is said to have said on Wednesday morning in the Bundestag's Energy and Climate Committee, writes the FAZ.

The legal basis can be found here.

State Secretary for Economic Affairs Patrick Graichen prepared the energy industry for the upcoming step on Monday, the world reported on Tuesday, citing the industry.

The dpa was confirmed this representation in circles of the energy industry.

At the moment, however, there is no indication that the Federal Network Agency will make the necessary determination immediately after a possible declaration of the alert level.

Observers assume that this will ultimately be decided by politicians due to the effects.

How much are utilities likely to raise prices?

The law gives them some leeway.

Utilities are allowed to raise prices to a “reasonable level”.

There is no upper limit to this level, says Thomas Engelke, energy expert at the Federal Association of Consumer Organizations (vzbv).

"Private households would then not be protected from extremely high gas prices either." He emphasizes that the regulation would also affect customers who have a so-called price guarantee.

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What price increases should households expect?

Nobody can say for sure.

According to Engelke, a household with an average annual consumption of 20,000 kilowatt hours of natural gas can already expect annual additional costs of 1,000 to 2,000 euros due to the price increases of the past few months.

“If the alert level and the determination of the reduction came now, then there could be far higher additional costs.”

How have wholesale prices recently developed?

They've gone up, and significantly.

The reason: in the past week, Russia has sharply reduced the delivery quantities to Germany and justified this with alleged technical problems.

For the first time in decades, supply contracts with German wholesalers have not been fulfilled.

Prices continued to climb on Wednesday.

Natural gas to be delivered on the Dutch trading platform TTF in July cost around 129 euros per megawatt hour in the afternoon.

On Monday a week ago, i.e. before the throttling, the price was still 83.40 euros.

That was high too.

In the past, long-term contracts were often concluded for 20 to 30 euros.

What do consumer advocates think of the new rules?

They want amendments to the law.

The price increases should only take effect four weeks after the announcement, and not after just one week.

For that long, customers should also have the option of extraordinary termination, says Engelke.

The law currently only provides for “immediate” termination after receipt of the notification.

The prices should also be capped.

"If the law stays that way, it is absolutely clear that private households need corresponding relief, especially in the coming heating season." A further relief package is then necessary.

There should also be no so-called gas locks for customers who can no longer pay their gas bill.

"That would be a security measure to protect households with low incomes in particular."