Price brake law established in Germany to address the effects of the energy crisis on the population
Written By
Associate
Germany
As an associate at our Hamburg office and a member of our Administrative & Regulatory and Corporate practice groups, I advise German and international clients in the energy and utilities sector as well as in corporate law.
Partner
Germany
I am a partner and member of both our international Energy and Utilities Sector Group and our Regulatory and Administrative Practice Group. What sets me apart is my in-depth legal expertise in combination with a keen sense of the challenges faced by industries which have to succeed in a largely regulated environment.
Since the beginning of the energy crisis, states are trying to cushion its effects on their populations. Extensive legislative projects affecting the energy sector have been implemented in order to achieve greater independence from Russian energy and gas supplies while keeping electricity affordable for the public. These legislative projects often require countries to invest immense sums in the energy sector and the social system.
To fund their efforts against the effects of the energy crisis, multiple countries have passed laws attempting to skim off so called “surplus revenues” from companies allegedly benefitting from the energy crisis. The German parliament also chose to follow this path by passing an Electricity Price Brake Act (Strompreisbremsegesetz -StromPBG) focusing on the electricity sector and a Natural Gas Heat Price Brake Act (Erdgas-Wärme-Preisbremsengesetz – EWPBG) targeting the heating sector on December 15th 2022. Both acts came into force on December 24th, 2022. The following overview will focus on the StromPBG, noting that the EWPBG due to the similar approach may cause corresponding obligations for affected companies.
The StromPBG’s approach is a widespread one, consisting of a profit skim off, a balancing and consumer/employee protection mechanism. The following are key regulations of the StromPBG:
- A monthly relief amount is to be granted by electricity supply companies to their end consumers by means of an automatic deduction from the electricity bill. The deduction in costs is capped for a consumption amount of up to 80 per cent for private consumers and 70 per cent for industrial consumers compared to their consumption in the previous year. To incentivise consumers to save energy, consumption above the threshold of 80/70 percent is charged at the full regular electricity price.
- Operators of electricity plants must pay 90 percent of the surplus revenue generated through windfall or excessive profits on the electricity markets to the grid operator. 10 percent of revenues are left with the plant operator to create an incentive for effective market behaviour. An exemption from this obligation is provided for certain types of electricity plants generating renewable energy up to a capacity of 1 MW.
- The skimmed surplus revenues are used to finance the monthly relief amounts for the end consumer. The mechanism is in force for the limited period from 1st December 2022 until 30th June 2023, with an option for extension until 30 April 2024 at the latest.
- The affected companies may further be subject to accounting and account management obligations, job retention and other retention obligations and may even face a ban on the right to pay bonuses and dividends.
While the general goal of cushioning the impacts of the energy crisis is certainly welcome, this new act raises various questions with regard to its interpretation and compatibility with other laws, especially EU law, resulting in a corresponding need for legal consultation amongst (potentially) affected companies.
