Budget crisis: higher electricity prices loom

Energy - Budget crisis: higher electricity prices loom

Private households and companies in Germany are threatened with higher electricity prices. Specifically, this relates to a planned federal subsidy for grid fees worth billions - which could be canceled in the course of savings following the budget ruling.

Without the subsidy, end customer prices would rise significantly, said Kerstin Andreae, Chairwoman of the Executive Board of the German Association of Energy and Water Industries (BDEW), to the German Press Agency. "An affordable electricity supply is of great importance, especially in times of uncertainty - also from a socio-political perspective. The President of the German Chamber of Industry and Commerce (DIHK), Peter Adrian, warned of burdens for the economy.

The governing coalition of SPD, Greens and FDP has planned a federal subsidy of up to 5.5 billion euros for the coming year to proportionally finance the transmission grid costs. The money was to come from the Economic Stabilization Fund (WSF) - however, as a result of the budget ruling by the Federal Constitutional Court, the federal government will have to dissolve this special fund at the end of the year. The money for the subsidy would therefore now have to come from the core budget. But this is likely to be difficult.

Decision before the end of the year

In the negotiations within the traffic light coalition on the 2024 budget, decisions could be made in the coming days. According to Finance Minister Christian Lindner (FDP), the federal government has to plug a hole of 17 billion euros in the federal budget.

The Federal Constitutional Court had declared the reallocation of 60 billion euros in the 2021 budget to the Climate and Transformation Fund (KTF) null and void. The money had been approved as a coronavirus loan, but was to be used retrospectively for projects to improve climate protection and modernize the economy. This is now tearing holes in the core budget. Billions could also be missing from the KTF for the coming year. Adrian warned against concentrating on major projects.

Concerns in the economy

"Due to the effects of the energy crisis, electricity prices are still significantly higher than in the past," said Andreae. "That's why the Bundestag was absolutely right to cap transmission grid fees and thus curb end customer prices." After the extreme increases in energy prices last year, it is now important to signal consistency and reliability to customers.

"If the subsidy were to be discontinued, this would also trigger a domino effect for companies at various stages of the energy industry's value chain: If the transmission grid fees rise, the distribution grid operators will also have to increase their fees," said Andreae.

"In turn, energy suppliers will have to include the overall increase in grid fees in their price calculations and adjust prices that have already been announced. Due to the legal deadlines, this would no longer be possible by January 1, 2024, but would have to be done as soon as possible."

Possible consequences

Grid fees are a component of the electricity price. If the federal subsidy for the fees for the transmission grids - the electricity highways - is discontinued, the comparison portal Verivox calculates that a family with an electricity consumption of 4,000 kilowatt hours would incur additional annual costs of around €100.

The green electricity provider LichtBlick even expects an additional burden of almost 170 euros for a household with an annual consumption of 4000 kilowatt hours if the federal subsidy is abolished. The gross electricity costs would rise by 4.15 cents per kilowatt hour. The promised subsidization of transmission grid fees, which the electricity grid operators have already factored into their grid fees, must be maintained.

DIHK President Adrian told dpa: "The increase in grid fees at the turn of the year alone would cost a typical medium-sized company a six-figure sum if the promised subsidy does not materialize."

Other relief measures also at risk?

It is already certain that the state gas and electricity price brake financed by the WSF will expire at the end of the year and not at the end of March as originally planned.

In the coalition's search for savings, a package worth billions to relieve the burden on industry and SMEs in view of the high electricity prices, which the coalition leaders had put together before the ruling, could also be called into question again. Among other things, the electricity tax for all manufacturing companies is to be reduced to the minimum level permitted in the EU.

Around 350 companies that are particularly exposed to international competition and are suffering from high electricity prices are to receive additional aid. The existing so-called electricity price compensation is to be extended for five years and expanded.

"The German government must strike a balance when setting the course for the budget - between keeping political commitments for individual industrial projects and the agreed relief for the broad-based grid charges and electricity tax," said Adrian. "Both are essential to safeguard the entire industrial value chain."