04 Aug 2022, 14:16
Edgar Meza

German govt ponders best design of new gas levy as households' gas bills set to tripple

Der Spiegel / Clean Energy Wire

As concerns in Germany grow over skyrocketing gas prices, the government is looking at ways to limit the cost explosion for consumers. However, the government still plans to introduce a new state levy on gas in October that could exacerbate financial difficulties for gas customers, news magazine Der Spiegel reports. The controversial new levy on both households and companies is intended to benefit gas suppliers who now have to pay much higher prices to replace cheap gas from Russia. The government is considering the elimination of the value added tax (VAT) on the surcharge – a move backed by the Free Democrats (FDP) government coalition party. “The levy must not be the basis for further tax revenue,” said Michael Kruse, who oversees energy policy for the FDP‘s parliamentary group. If removing the levy proved to be technically problematic, “it is clear to me that the additional government revenue must be returned to consumers together with further relief.” Meanwhile, the Association of German Cities is calling for state aid for overburdened households. “The federal government should reduce the surcharge through state subsidies if prices on the market continue to rise and there is a risk of too great a burden on consumers and the economy,” said Markus Lewe, mayor of Münster and president of the association.

The government is also grappling with potential legal problems associated with the surcharge and whether utilities ultimately will have to cover rising costs on their own. The levy is expected to add 1.5 to 5 cents per kilowatt hour (kWh), which would mean a price hike of 300 to 1,000 euros for an average four-person household. Removing VAT could save such a household between 57 and 190 euros.

In related news, the gas price level for households reached a new record in August, according to comparison website Verivox. Year-on-year, average prices have risen by around 184 percent. As a result, gas costs for private customers have almost tripled. An end to the price hike is not in sight, Verivox adds, noting that in addition to the coming surcharge, numerous regional suppliers have already announced further price increases.

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