According to a draft law publicized on Thursday, July 28, the government aims to spread out the cost of replacing the gas no longer coming in from Russia among all of the country's consumers and prevent gas traders from becoming insolvent due to increased operating costs. (Related: Russia reduces amount of gas flowing to Europe through Nord Stream 1 pipeline by 80%.)
Before the levy, gas importers bore all of the costs of the rising price of gas imports. With the levy, the government allows them to pass up to 90 percent of their cost increases onto consumers.
Households and industrial consumers that have long-term contracts with gas companies will be hit by the added charges, which will be in place until the end of September 2024. Gas importers suffering from higher operating costs will have to bear the added expenses until the levy kicks in.
Importers like Uniper, Germany's largest recipient of Russian gas, which received a $15 billion bailout from the government, and VNG – Verbundnetz Gas, the second largest, have received the news of the new levy with anticipation.
VKU, a local utility association, also welcomed the levy, adding that it should go higher or be extended if high gas prices persist.
German Vice Chancellor and Minister for Economic Affairs Robert Habeck said the gas levy would force consumers to pay an additional 1.5 to five euro cents ($0.15 to $0.51) per kilowatt hour, or an additional 500 euros ($512) per year for a family of four.
"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," said Habeck, who called the levy "not a good step, but a necessary step."
Habeck noted that Germany is going through its "biggest energy crisis" since the country's dispute with Russian state-owned gas corporation Gazprom.
"This [price] difference is the levy. It is then passed on to the end consumer because otherwise the companies would permanently lose millions per week," said Habeck. He added that people who will fall into poverty because of higher energy prices must be protected and the government should pass relief measures to prevent that from happening.
Around half of all houses and apartments in Germany are heated with gas-powered systems. At a time when household finances are already being strained by soaring inflation and the ongoing global economic crisis, the levy is expected to push a lot of people into poverty.
Habeck noted that people falling into poverty because of the higher energy prices must be protected and promised that nobody would face financial hardship because the government will pass support measures for those struggling with their bills.
While the left-wing coalition government of Germany only expects gas prices to cost households an additional 500 euros per year, Check24 estimates that the gas levy could end up costing consumers a lot more.
According to the analysis, a family of four with an annual consumption of around 20,000 kilowatt hours would see their bills increase by 476 euros with an additional two-cent surcharge. If the government's gas levy forces families to pay an additional five cents, the bill would spike by 1,190 euros ($1,218).
Despite knowing that the additional financial burden is something many German families are unable to bear, the government claims this is the only solution to maintaining the country's gas supply over the winter as the bloc seeks to decrease its dependence on Russian gas and diversify where it gets its energy.
"Without [the levy], gas suppliers throughout the supply chain would be at risk," said Habeck.
Additional information regarding the levy, such as the exact amount German consumers would have to pay, is expected to be published by mid to late August, according to Habeck's ministry. The German Cabinet is expected to publish an ordinance at the same time it reveals more information regarding the levy, which will be set at the same level for all gas suppliers in Germany as a way of being fairer to consumers.
Learn more about the gas situation in Germany at NewEnergyReport.com.
Watch this clip of Germany warning that it will not be able to survive the coming winter without Russian gas.