Germany Tries to Contain Energy Prices

Germany is considering capping electricity prices for households and industry to mitigate the impact of energy costs. It will be necessary to contribute to the financing of this cap and to the stabilization of the electricity transmission networks.

A €200 billion aid package

Germany could take 90% of the profits that electricity companies make above production costs. The tax would apply as of March for spot prices and as of December for future prices. RWE, Germany’s largest electricity producer, announced that its shares were down 1.5% after the announcement.

The government of Chancellor Olaf Scholz announced a €200 billion aid package at the end of last month. It will help households and businesses contain soaring energy prices in Europe’s largest economy. The document does not specify the amount of the levy.

The cap, which the project does not quantify, will be based on historical annual electricity consumption. However, the project does not provide for a one-time payment to cover a month’s electricity bill. Gas consumers benefit from this relief.

Crisis taxation

Italy, the Czech Republic and Great Britain are introducing similar taxes. Spain is introducing a temporary tax. Last month, the European Commission set out the framework for windfall profits levies on energy companies.

However, in the face of the German government’s insistence, it leaves plenty of room for European members to design their own measures. In Germany, the levy would take into account the basic costs of companies depending on the type of energy production.

Thus, the tax would represent €0.10/kWh for renewable energies. And, it represents more than €0,03/kWh per security surcharge. This measure means that 90% of the profits made above €0.13 will disappear.