Germany plans to impose restrictions on the gas price “brake”

An energy relief package, including a gas price brake and a drop in fuel sales tax, was introduced by Berlin one month ago in an effort to assist private consumers as well as small and medium-sized businesses (SMEs). The brake, which establishes a certain price, is distinct from attempts to cap market prices, which is a measure that the European Union has been debating for weeks but has been unable to agree upon. This is in part due to opposition from Germany, which claims that the measure could make it more difficult to source supplies. In the meantime, Berlin has argued that its energy relief package is helpful to everyone of Europe since it helps to strengthen the economy of the region’s most populous country.

One industry source and one source close to the commission who asked not to be identified said that a German expert commission charged with drawing up plans to ease the impact of gas prices met from midday on Friday until well past midnight and set out proposals for specific conditions to attach to the brake. The meeting was held in Germany, and the commission was charged with drawing up plans to ease the impact of gas prices. According to the sources, after the recommendations of the commission have been finalized, it is anticipated that the government would approve a significant number of them.

The warnings that many of the small and medium-sized enterprises that represent the backbone of German industry were considering migrating to cheaper jurisdictions led to the formulation of the recommended conditions for preserving jobs and remaining in Germany. Any company that violates the terms of the agreement will be required to make up the difference in cost to the government. The brake would apply to 80% of households’ basic usage with a maximum of 12-euro cents per kilowatt hour (Kwh), while market prices will apply for the remaining 20% of consumption in order to encourage residents to reduce their gas consumption and save money.

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According to the sources, the price of gas procurement for around 25,000 major industrial clients will be capped at seven-euro cents per kilowatt hour for seventy percent of usage. The cap will be in effect for private families and smaller businesses beginning in March 2023 and lasting through the end of April 2024. On the other hand, the regulation may become effective for industrial clients as early as January. According to a draft law that was released on Wednesday, the government plans to offer a one-time payment to gas consumers. This payment is anticipated to be made in December, and it is estimated that it would cost the government approximately 12 billion euros ($11.96 billion). The commission has not yet reached a decision regarding whether or not companies would be permitted to pay dividends to shareholders or bonuses to management while still being eligible for the cap.