German households would have to pay about 500 euros ($509.65) more per year for gas after a fee was imposed to help utilities cover the cost of replacing Russian supply, increasing pressure on Berlin to come up with other public-relief measures.

Trading Hub Europe, the German gas market operator, announced on Monday that the charge has been set at 2.419 euro cents per kilowatt hour (kWH).

The fee, set by Germany to assist Uniper (UN01.DE) and other importers in dealing with rising prices, will go into effect on October 1 and will last until April 2024.

The tax will amount to an additional annual cost of roughly 480 euros for an average family of four, or an increase of about 13% over the Verivox price comparison platform’s projection of an average gas bill of 3,568 euros based on usage of 20,000 kWh/year.

The charge will also apply to industry, with German steel group WV Stahl estimating that it will add about 500 million euros per year to the sector’s energy expenditures, on top of the 7 billion euros already linked to high energy prices.

“The gas surcharge significantly increases the cost pressure already exerted on the steel industry by the extreme price increases on the energy markets,” WV Stahl President Hans Jürgen Kerkhoff stated.

Economists cautioned that the charge will exacerbate Europe’s largest economy’s already high inflation rate of 8.5%, with several relief measures, such as low-cost public transportation tickets, set to expire.

“The gas levy is expected to increase inflation, including the value-added tax, by almost one percentage point,” said Commerzbank chief economist Joerg Kraemer to Reuters, adding that the measure adds to accumulating evidence that the German economy may enter a slump this winter.

The Federation of German Industries has asked for corporate assistance.

Germany is awaiting a decision from Brussels on the levy’s VAT exemption, and Chancellor Olaf Scholz last week offered an additional assistance package for households, a vow confirmed by his deputy and Economy Minister Robert Habeck following the announcement of the levy’s amount. 

“The levy is a consequence of Putin’s illegal war of aggression on Ukraine and the artificial energy shortage caused by Russia,” Habeck said in a statement.

Russia has reduced gas flows to Germany, blaming technical issues and the red tape of Western sanctions for a 20% reduction in supply via the vital Nord Stream 1 pipeline.

The German administration has characterized the cuts as politically motivated.

Source: Reuters

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