Gas crisis: Why Germans fear a cold winter
So you think its bad in the UK. Take heart its worse in Germany
In Germany, gas prices are going through the roof, and consumers are getting very worried. Policymakers have different ideas on the right response.
One family in Germany’s state of Brandenburg, near the capital, Berlin, this week told their story on a call-in show on RBB public radio.
They said they were shocked to receive a letter from their local gas supplier notifying them of an upcoming price hike and asking them to pay an astronomical €1,515 ($1,477) instead of €143 a month for natural gas to heat their single-family home on the outskirts of Berlin.
In Germany, households pay a monthly advance on their gas and electric bills and then receive an annual statement reconciling the prepayments with the cost based on actual usage at the end of the billing year.
A tenfold increase is simply not feasible, the caller from Brandenburg said on the radio show
The gas utility in the case mentioned is a rather small company that supplies only about 20,000 households and for a long time lured customers with cheap prices. Now, amid the current supply problems, it is particularly hard-hit: The shortfall in gas deliveries from Russia is forcing providers to shop elsewhere at higher prices, destroying their business model.
Reports like the one from Brandenburg are becoming more frequent now that it is getting colder in Germany and the heating period is beginning. Many gas providers, and electricity providers as well, have begun sending out notifications announcing a threefold or greater increase in the monthly advance.
According to the latest surveys, 40% of people in Germany expect to have problems with paying their energy bills in the coming winter. Half of all German households use natural gas for heating.
No cheap gas anywhere
Consumer centers advise customers like the family from Brandenburg to look for a cheaper supplier. But it doesn’t get really cheap anywhere anymore.
Customers who get their gas from one of the large “basic utility suppliers” (the largest supplier in a given region) are comparatively well-off. In Berlin, for example, GASAG is the main natural gas supplier and vendor, which, according to its own statements, has around 800,000 customers in the capital and is the largest municipal supplier in the country.
For basic suppliers, it is difficult to refuse new customers, and they can do so only if they are in serious economic difficulties themselves. As of November 1, basic suppliers like GASAG will no longer be allowed to charge old and new customers different prices.
Smaller utility companies, however, will retain their flexibility.
GASAG has also drastically increased its prices since the outbreak of war in Ukraine: It initially increased the monthly advance on gas by around 50%, and by November it will have doubled it. But further price hikes have not been ruled out.
“No one should have to suffer, no matter how cold it gets,” the head of the company, Georg Friedrichs, told Berlin’s Tagesspiegel newspaper in an interview. But he refused to be drawn on making a prediction of how much and how fast the prices might continue to rise.
High prices are here to stay
Finance Minister Christian Lindner from the business-oriented Free Democrats (FDP) is warning of hard times ahead. “We assume that in the foreseeable future — in 2023 — we will experience a normalization of prices. Not back to the old levels, but to somewhere around the levels of world market price for liquid gas,” he said recently. Liquefied natural gas (LNG) is now increasingly being purchased by many countries, including Germany, as a substitute for cheap Russian gas.
Speaking at an industry event in Berlin, he admitted that gas prices would remain a “challenge.” He said his government was now faced with the task of “building a bridge, toward a new normality of increased energy prices.” In other words, people would have to get used to the fact that energy will remain expensive in the long term.
The controversial gas surcharge
Another price driver for gas is the state levy that will be introduced on October 1 after much dispute and back-and-forth. It has been set at 2.419 euro cents per kilowatt hour and is to be paid by all of the country’s gas-consuming households and businesses to prop up struggling energy providers. Economists estimate that the levy will cost an average household another €600 a year.
However, the levy may be raised if the price of natural gas continues to rise. Some 11% of German electricity is currently still generated with natural gas, so many economists also expect a marked hike in electricity prices. The consequences of Russia’s attack on Ukraine will thus really hit home to Germans in the coming months.
And so the most effective way to reduce energy bills is to save wherever possible. The consumer advice organization Stiftung Warentest has calculated that a family of three can save around €970 a year on electricity and gas with just a few measures: by using less hot water, showering less and at a lower water temperature and installing an energy-saving shower head. Lowering the average room temperature to 20 C (68 F) also makes a marked difference. And wherever possible, laundry should be hung out to dry, rather than popping it into an electricity-guzzling clothes dryer.
Opposition calls for a price cap
But how low-income households are supposed to cope with the high prices is still not clear. Bavaria’s conservative regional Christian Social Union (CSU) has now proposed a model for a gas price cap for three-quarters of private household heat consumption.
“For private households, it would be conceivable to cap 75% of their current gas purchases at a citizen base price,” CSU politician Alexander Dobrindt told the regional Augsburger Allgemeine newspaper. “Beyond that, they would have to pay the price,” he added.
But critics of that proposal have pointed out that this would require subsidies that would put a tremendous strain on public coffers, leading the government to once again incur massive debt.
This article was originally written in German.