Germany set to impose gas levy on consumers to support ailing importers

Germany is set to impose a levy on all gas consumers from Oct 1 aimed at helping suppliers grappling with soaring gas import prices, a draft law showed on Thursday, news agency Reuters reported. 

The levy aims to share the additional costs for replacing gas from Russia among all gas users and to prevent insolvencies among gas traders.

Households and industrial consumers with long-term contracts will be hit by the charges, which will be valid until the end of September, 2024, the document showed. Gas importers will have to bear rising costs by themselves until the levy kicks in.

German Economy Minister Robert Habeck said the levy would amount to between 1.5 euro cents and 5 euro cents per kilowatt hour (Kwh), with the proceeds available to all companies that need to replace Russian gas.

He said the measure was a difficult but important one to stabilise 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 said.

More details about the levy will be announced in August, the document showed.

A prerequisite to the government triggering the mechanism is a significant disruption to gas flows into Germany. Russia's Gazprom cut flows on the Nord Stream 1 gas pipeline to just 20% of capacity this week.

With Germany going through what Habeck called its "biggest energy crisis", Gazprom's failure to deliver reserved gas was pushing companies to procure the fuel at significantly higher market prices, he said.

"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," he added.

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, according to the Rheinische Post, but there should be relief measures to support low-income households.

Habeck said people falling into poverty because of the higher energy prices must be protected and relief measures would be targeted.