New Law Allows Huge Gas Price Increases – You Should Know It

Updated on 06/22/2022 at 7:47 PM

  • The alert level may soon be announced in the gas emergency plan.
  • Applying a special price rule may increase the cost of gas – however, there is an important note to be made in advance.

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Germany’s supply situation remains tense: will natural gas soon become more expensive – and without delay? Since May 21, gas suppliers have had at least one legal option, under certain conditions, to “modify” all their contracts from now on, that is, to raise prices.

The new Section 24 of the Energy Security Act, called “EnSiG,” makes this possible. But not without further ado. How to clarify the central questions:

What is the topic of the paragraph?

Ultimately, it is about energy suppliers not being brought to their knees by rising wholesale prices and jeopardizing their customers’ supply through bankruptcy. Sometimes companies, such as municipal utilities, have to purchase additional natural gas at current prices in order to be able to serve all customers. At the same time, income from existing contracts may not cover these additional costs. Therefore, the legislator by law allows them under certain conditions to set new prices for all their contracts. So that things can be done quickly in an emergency, the new rates should be applied a week after the announcement.

When can service providers do this?

Two conditions must be met: First, the alert level or emergency level must be declared in the gas emergency plan. On the other hand, the Federal Network Agency should have set a “significant reduction in the total volume of gas imports into Germany” on this basis. This decision must be published in the Federal Official Gazette. Only then are companies allowed to raise prices. The law also sets out rules for returns: “Once the supply throttling clears, the Federal Network Agency must lift this decision,” says the Federal Ministry of Economics. Then the “right to adjust prices” forfeits.

The early warning level has been in effect since the end of March. Is the second stage, the warning stage, imminent?

Maybe. According to a report in the Welt newspaper, the federal government is preparing to announce the alert level within a few days. The newspaper reported Tuesday, citing industry, that Secretary of State for Economic Affairs Patrick Gration prepared the energy industry for the next step on Monday. The German news agency confirmed this representation in the energy industry. However, at the moment, there is no indication that the Federal Network Agency will make the necessary decision immediately after the possible announcement of the alert level. Observers assume that politicians ultimately decide this because of the effects.

How much are utilities likely to raise prices?

The law gives them some freedom. Suppliers are allowed to raise prices to a “reasonable level”. There is no upper limit to this level, says Thomas Engelke, an energy expert at the Federal Association of Consumer Organizations (vzbv). Then private households will not be protected from the very high gas prices. He asserts that the regulation will also affect customers with a so-called price guarantee.

What additional costs can be expected?

Nobody can say for sure. According to Engelke, a household with an average annual consumption of 20,000 kWh of natural gas can already expect annual additional costs of 1,000 to 2,000 euros due to the price hikes in recent months. “If the level of alert comes and the reduction is decided now, there could be much higher additional costs.”

How has wholesale prices evolved recently?

They have gone up, significantly. The reason: last week, Russia sharply reduced the volumes of deliveries to Germany and justified this with alleged technical problems. For the first time in decades, supply contracts with German wholesalers were not fulfilled. Prices continued to rise on Wednesday. On the Dutch TTF trading platform, the cost of natural gas to be delivered in July is around €129 per megawatt-hour in the afternoon. On Monday of a week, that is, before the throttling, the price was still 83.40 euros. That was also high. In the past, long-term contracts were often made for 20-30 euros.

What do consumer advocates think of the new rules?

They want changes to the law. Price increases should not take effect until four weeks after the announcement, not just one week after. For a long time, Angelki says, customers should have the option of exceptional finishing. The law currently only provides for “immediate” termination after notice has been received. Prices must also be specified. “If the law continues like this, it is quite clear that private households need the corresponding relief, especially in the upcoming heating season.” Then another relief package would be needed. There should also be no so-called gas locks for customers who can no longer pay their gas bill. “This would be a security measure to protect low-income families in particular.”
© dpa

Concern about energy costs and gas supplies does not end at the moment. Consumers can respond to this and save energy with these three tips. © ProSiebenSat.1

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