Germany plans to impose a charge on all gas users beginning Oct. 1 to assist suppliers dealing with rising gas import costs, according to a draft bill released on Thursday.

The charge attempts to spread the increased expenses of replacing Russian gas across all consumers while also preventing gas dealers from going bankrupt.

The tax will apply to households and industrial users with long-term contracts and will be in effect until the end of September 2024, according to the document. Gas importers will have to suffer higher expenses until the charge takes effect.

The fee benefits struggling importers, particularly Uniper (UN01.DE), Germany’s largest consumer of Russian gas, which got a state bailout last week, and EnBW’s (EBKG.DE) gas company VNG (VNG.UL), Germany’s second-largest.

The fee, according to German Economy Minister Robert Habeck, would range from 1.5 and 5 euro cents per kilowatt hour (Kwh), with the funds accessible to all enterprises who need to substitute Russian gas.

A four-person home might incur increased charges of up to 1,000 euros ($1,014) per year as a result.

According to Habeck, the action was challenging but necessary to stabilize the energy market.

“One doesn’t know exactly how much (gas) will cost in November, but the bitter news is that it’s definitely a few hundred euros per household,” he added to Reuters.

According to the paper, further information on the levy will be released in August.

The fee should be increased or prolonged if high costs continue, according to the local utility group VKU.

Significant interruption to gas shipments into Germany is required for the government to activate the mechanism. This week, Russia’s Gazprom reduced flows through the Nord Stream 1 gas pipeline to barely 20% of capacity.

Last month, Germany entered the second of three phases of its supply emergency plan, enabling the government to activate a price adjustment provision, allowing suppliers to pass on price hikes to their consumers, though it has yet to do so.

A universal charge that raises gas costs for everyone, regardless of source, is regarded more equitable.

Meanwhile, the government has urged consumers and business to save energy now so that gas storage facilities may be fully stocked by November, up from 67.2 percent today.

Companies are assessing their choices, and Berlin has already announced that it would turn down lights at 200 public buildings and sites at night. 

With Germany experiencing its “biggest energy crisis” Gazprom’s refusal to provide reserved gas was forcing industries to purchase the fuel at much higher market costs, according to Habeck.

“The levy is the difference in pricing. It is then passed on to the end consumer because otherwise the companies would permanently lose millions per week,” he told Reuters.

According to the Rheinische Post, Marcel Fratzscher, president of the DIW economic institute, said it was “right and necessary” to pass on costs to all consumers, and Germans should prepare for at least a tripling of gas heating bills, but there should be relief measures to help low-income households.

People who are slipping into hardship as a result of increasing energy costs, according to Habeck, must be safeguarded, and assistance measures will be targeted.

Source: Reuters

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