German consumers face gas-bill surge with move to pass on costs

GERMAN households will have to start paying an energy levy this fall, adding as much as 1,000 euros (US$1,020) per year to the cost of living following Russia’s moves to squeeze gas deliveries.

Starting in October, utilities will be able to pass along costs for offsetting missing Russian supplies. The government, which had tried to shield consumers from turmoil in energy markets, will present the necessary decree on Thursday.

Germany had sought to avoid making consumers pay for higher energy costs, which have surged as Russia retaliates against European sanctions over the war in Ukraine. But strains on utilities forced the government’s hand as it seeks to lower demand to prepare for the winter amid concerns President Vladimir Putin could completely shut off gas deliveries.

“The challenges we are facing are enormous and they affect significant areas of the economy and society,” Economy Minister Robert Habeck said in a statement. “We can only overcome them together.”

The amount of the levy could range between 1.5 and 5 cents per kilowatt hour, which could add up to an annual surcharge of 1,000 euros in the worst case, said a government official, who asked not to be identified in line with briefing rules.    

After announcing a bailout for energy supplier Uniper SE last week, Chancellor Olaf Scholz said 90% of the higher costs for utilities could be passed on to consumers and that the government is working on aid programs for low-income households. He said he expected a levy of 2 cents per kwh.

Confronted with one of the biggest energy crises in modern history, the amount of fuel European nations can save will largely determine the continent’s ability to make it through the winter with limited disruptions. Higher prices represent a strong incentive to reduce consumption.

Germany’s gas storage facilities are 66.8% full, well short of the government’s target of 95% for November, according to data from the country’s network regulator.

“It is doable to cut gas use,” said Samantha Dart, Goldman Sachs Group Inc’s head of natural gas research. “It is gonna be painful, as you need to curtail economic activity, but it is doable.” – Bloomberg / pic AFP