Germany Plans To Cap Energy Bills By Taxing Electricity Producers

Germany intends to cap electricity prices for individual consumers and industries to help them with surging energy bills, financing part of the measure with a profit tax on lower-cost electricity producers, Reuters reported on Wednesday, citing a draft proposal from the German Economy Ministry.

The plan would be partly funded by the new profit tax and partly from the planned $196 billion (200 billion euros) “defensive shield” to protect companies and consumers against the impact of soaring energy prices. At the end of September, the German government said that it would ditch earlier plans for a gas levy on consumers and instead would introduce a gas price cap to curb soaring energy bills.

The windfall tax on power producers could be 90% of the profits the electricity generating firms make above their production costs, according to the document outlining the power price cap seen by Reuters. Prices of electricity generated from gas, hard coal, and biomethane will not be part of the measures because of higher production costs. 

The package is expected to be discussed by the government on November 18, according to the document.

Germany has recently proposed a cap on gas prices for consumers, too, which also includes a one-off payment of a month’s bill. This is not part of the electricity cap measures under consideration.  

Soaring power and gas prices in Europe’s biggest economy are not only burdening households, but also many energy-intensive industries, some of which have already announced curtailment, suspension, or relocation of production due to very high energy costs.

Germany’s energy regulator insists that “significant” gas and energy savings are necessary to avoid a winter of rationing and gas emergency. Households, industry, and businesses need to cut consumption by at least 20%, Klaus Müller, the president of the Federal Network Agency, Bundesnetzagentur, said earlier this month.

By Tsvetana Paraskova for Oilprice.com

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