What’s happening?

As The Local has been reporting, the German government has put together a draft law which will see a ‘Gasumlage‘ – or levy – brought in to prop up struggling suppliers by allowing them to pass on nearly all the extra costs of soaring gas import prices to consumers. 

According to the initial draft, the levy is expected to apply from October 1st 2022 until April 1st 2024. It’s not clear if costs will reach consumers immediately, but bills will rise significantly as a result of the levy. 

READ ALSO: What is Germany’s new gas ‘tax’ and who will pay more?

Who is affected?

Everyone who uses gas to heat their home or business is affected by the new levy. The charge applies even when customers have already signed contracts where a fixed monthly payment is agreed. About half of all homes in Germany use gas for heating and/or hot water.

Wait – so ordinary people now have to pay for the gas supply problems?

Basically – yes. As Russia has been cutting down supplies, the German government says the levy is needed to share the additional costs for replacing the gas.

Under the Energy Security Act, 90 percent of the additional purchase costs of securing gas will be passed on to all gas consumers from October.

If, for instance, Uniper – the largest gas trader in the country – no longer gets enough gas and therefore has to buy on a daily basis and pays three times as much for this resource, then all gas gas consumers in Germany will bear 90 percent of this cost.

READ ALSO: Why households in Germany will soon face gas bill hikes

What cost increases will these gas customers face?

The ‘tax’ will make gas prices more expensive, although, we won’t know the exact amount of the levy until the middle or end of August.

However, we do have an idea of how much the rising costs will be. Energy and Climate Minister Robert Habeck said last week that the levy could be anywhere in the range of 1.5 to 5 cents per kilowatt hour.

For many consumers, this will be an enormous challenge.

According to calculations by the internet portal Check24, a one-person household with an annual consumption of about 5,000 kilowatt hours would have to pay between €89 and €298 a year for the levy alone, while a family with a consumption of 20,000 kilowatt hours would have to reckon with additional costs of €357 to €1,190.

Many consumers who have a price guarantee in their contracts may think they won’t have to pay the levy – but they are wrong, warns Udo Sieverding, energy expert at the North Rhine-Westphalia Consumer Advice Centre.

That’s because this guarantee does not protect against state surcharges or levies. “Everyone has to pay,” says the consumer advocate, regardless of their contract or deal with a supplier. 

READ ALSO: ‘Difficult winters ahead’: Germany sets out emergency energy saving measures

Is it unfair to make gas consumers – and not all households – pay the levy?

The price hike only affects gas customers in Germany. So people whose heating or hot water comes from different sources – such as heat pumps or electricity – will not have to pay it. 

However, gas customers have already been dealing with extremely high prices on new contracts recently. Since July last year, prices for a family household have risen from €1,300 to €3,415 a year. 

Including a levy of five cents per kilowatt hour, a household would have to pay an average of €4,605 – 254 percent more than in July 2021.

Sieverding, of the Consumer Advice Centre, thinks this isn’t fair – and Germany should look at introducing tax increases instead of just making gas consumers pay.

“It’s about solidarity for society as a whole, and tax increases would make more sense than a levy,” he said. He also fears that more and more fan heaters will be plugged into the sockets in winter, putting a strain on the electricity grid.

READ ALSO: Should I invest in an electric heater in Germany this winter?

Why do only gas customers have to pay?

According to German media, gas is the scarcest commodity among the energy sources, and the practical implementation of passing the costs onto gas consumers is much easier than putting in place a general tax on everyone.

Plus: a levy that affects everyone is a serious intervention that has to be proportionate and legally secure.

Isn’t Germany meant to be taking the heat off ordinary people?

Yes. The German government has been trying to cushion the blows of rocketing energy prices and subsequent rising inflation. It has taken measures such as introducing the €9 ticket and a fuel tax cut for three months, giving out a Kinderbonus to children in July and is set to give a taxable €300 payout to people in employment from September – and even got rid of the EEG levy on electricity earlier than planned.

So it seems strange that it is actually bringing in a new levy. However, it reflects the dire situation that Germany is in. Having relied on cheaper Russian gas imports for decades, now the country is having to scramble around to find other sources – and ordinary households are paying the price of political decisions and Russian President Vladimir Putin’s actions. 

READ ALSO:

• Energy crisis to labour shortage – Five challenges facing Germany right now
• How Germany became ensnared by Russian gas

What are businesses saying?

As you can imagine, they are concerned too. The Federation of German Industries has argued for a price cap, or an opportunity to pay in staggered amounts.

“Otherwise, the gas levy threatens to massively undermine the competitiveness of companies,” the association said. 

The German Energy Industry Association, however, welcomes the levy as a measure to pass on replacement costs quickly and “to preserve the liquidity of the energy supply companies”.

The association also highlighted that the charges “are levied equally on all consumers and without privileging certain customer groups”. This allows for a transparent calculation of the levy and a fair distribution of the burden, they said.