Due to the recent massive increase in energy costs, the legislature decided at the end of last year to reduce the burden on electricity, gas and heat customers. Accordingly, the prices for electricity, natural gas and district heating are limited to a basic consumption quota. In this article you will find out everything you need to know about the electricity, gas and heat price brake.
Energy cost relief: electricity price brake, gas price brake and heat price brake simply explained
Background to the electricity and gas price brake
In December 2022, the German Bundestag passed the draft laws for electricity, gas and heat price brakes. Together with other hardship aid, they are intended to relieve the burden on citizens, but also businesses, hospitals, nursing homes and social and cultural institutions and protect them from massive increases in energy costs. The relief applies retroactively to the months of January and February from March 2023, and in the case of large industrial gas consumers from January. A term is currently planned until the end of 2023. There is an extension until April 2024, but a separate vote is still required.
Consumers automatically benefit from the electricity price cap
The main regulations are that electricity, gas and heat prices are capped for a proportion of consumption and cannot rise above this limit. The advantage is that consumers do not have to do anything themselves to take advantage of the support. As with the December emergency aid, the reimbursement is made automatically by the suppliers, who collect lower advance payments or send lower final bills based on existing contracts.
Scope and funding
The electricity, gas and heat price brakes are the central components of the economic defense shield with a total volume of 200 billion euros. They are financed by the economic stabilization fund launched in 2020 and by skimming off windfall profits from electricity producers.
Cushioning the consequences of the war in Ukraine
The central background to the energy price brakes is the situation in Ukraine, which has led to European wholesale natural gas prices increasing many times over within a year. As a result, the prices for electricity and district heating have risen massively, which has had a significant impact on the bills of private households and companies. As a result of this development, the government was forced to introduce relief for consumers and the economy.
Relief through the electricity price brake or the electricity price cap
The legal basis for the electricity price brake is Section 5 StromPBG. Accordingly, private consumers and small companies receive financial relief when it comes to electricity costs, which is taken into account in the monthly installment payment from suppliers. The prerequisite for this is that the maximum annual electricity consumption is 30,000 kWh and that the contractually agreed labor price is more than 40 ct/kWh.
How does the electricity price brake work?
The annual consumption is forecast by the respective network operator, usually based on the previous year's consumption. The price cap applies to 80 percent of the annual consumption forecast in September 2022. For electricity that exceeds this quota, the contractually agreed price must continue to be paid. In this way, the legislature creates additional incentives to save electricity. The maximum possible reduction of the discount is 0 euros.
If these are medium-sized or large companies with an electricity consumption of more than 30,000 kWh, the price limit is 13 cents plus taxes, duties and surcharges for 70 percent of previous consumption.
This is how gas price brakes and gas price caps work
The second law, which was drawn up together by the Federal Chancellery, the Federal Ministry of Finance and the Federal Ministry for Economic Affairs and Climate Protection, implements the suggestions of the independent Gas and Heat Expert Commission. For private households and small and medium-sized companies with gas and heat consumption of up to 1.5 million kWh annually, as well as for care facilities, the gas price is limited to 12 cents per kilowatt hour and the price for district heating to 9.5 cents per kilowatt hour. If central heating is installed for several residential units, property managers and landlords are obliged to pass on the relief to their tenants via the utility bill.
The price cap applies to 80 percent of the annual consumption forecast in September 2022. Consumption that exceeds the quota must continue to be paid for at the contractually agreed price. In March 2023, the relief amounts for January and February were also retroactively credited.
Support for the industry through the gas and heat price cap
From January 2023, the gas and heat price brake will also help industry suffering from high prices to secure its production and personnel. For this purpose, the kilowatt hour of gas for them is capped at 7 cents per kilowatt hour. For heat, the price is 7.5 cents net. The caps apply to 70 percent of 2021 consumption.
Hardship regulations
In addition, there are hardship regulations under which private households, companies and other institutions such as cultural and research institutes receive support from an additional hardship fund, with which the federal states also limit price increases for other heating materials such as liquid gas, oil and pellets or provide subsidies to cover the costs Grant heating costs.
The most important questions and answers about the electricity, gas and heat price brake
What do you have to pay if the agreed price for work is below the price cap?
If the agreed price for electricity is below 40 cents/kWh and for gas below 12 cents/kWh, you pay the price agreed in the contract for your consumption. In this case, the price caps do not apply.
Are there energy cost reliefs for pensioners too?
The Federal Council has approved the law for the payment of a one-off energy price flat rate of 300 euros gross to pensioners and pension recipients. It can be claimed by anyone who is entitled to an old-age, disability or survivor's pension from the statutory pension insurance or to pensions in accordance with the Civil Service or Soldiers' Pensions Act as of December 1, 2022. Only German citizens residing in Germany are eligible.
The flat rate will be paid once by mid-December via the respective pension paying offices. There is an income tax obligation, but no social security obligation.
To which energy sources do the price brakes apply?
The legislature provides for price controls for the following energy sources.
- Electricity purchased from the grid
- Piped natural gas
- District heating
No relief is provided for through the price brakes for liquid gas, pellets and oil, among other things. However, special hardship regulations apply here, which you can find out about on the federal government's website.
What applies to the electricity price brake for time-variable electricity tariffs?
If a time-variable electricity tariff has been agreed, the relief amount is calculated from the average work price for the entire month. It results from the individual agreed work prices according to the time validity. If the average labor price cannot be determined on the first of the month, the average labor price of the previous month is used as the basis for calculation.
How does the electricity price brake work for heat pumps?
If a heat pump or electric heater has its own meter or connection, the electricity price for this network outlet is limited to 28 ct/kWh. Additional costs such as network fees and taxes are included. This only applies as long as the electricity consumption does not exceed 30,000 kWh annually.
Does a change of supplier have an impact on price controls?
No. In the event of a change, you simply receive the relief from the new supplier. All you need to do is provide a copy of the invoice from the original supplier. The central legal bases are: Section 8 StromPBG and Section 24 EWPBG.
Do electricity and gas price caps have to be taxed?
In principle, there are no more taxes on the electricity and gas price brakes than on the December emergency aid. However, it was originally planned that all citizens who still have to pay the solidarity surcharge would also have to pay tax on the financial support for energy prices. Here, the assistance should be added to the taxable income and the amount of income tax payable should be calculated based on the entire amount.
However, these only apply to higher earners who continue to have to pay the solos. However, this no longer applies to around 90 percent of taxpayers.
Would you like to sell your property? We would be happy to advise you.
