Private households and companies in Germany are threatened with higher electricity prices. Specifically, it is about a federal subsidy worth billions for network fees that was actually planned – but which could be canceled as part of savings following the budget ruling.

Without the subsidy, end customer prices would rise significantly, said Kerstin Andreae, chairwoman of the executive board of the Federal Association of the Energy and Water Industry (BDEW), to the German Press Agency. “Affordable electricity supply is of great – also socio-political – importance, especially in times of uncertainty. The President of the German Chamber of Commerce and Industry (DIHK), Peter Adrian, warned of burdens on the economy.

The government coalition made up of the SPD, Greens and FDP has planned a federal subsidy of up to 5.5 billion euros for the coming year to partially finance the transmission network costs. The money was supposed to come from the Economic Stabilization Fund (WSF) – however, as a result of the Federal Constitutional Court’s budget ruling, the federal government must dissolve this special fund at the end of the year. The money for the subsidy would now have to come from the core budget. But that could be difficult.

Decision this year

Decisions could be made in the coming days in the negotiations within the traffic light coalition about the 2024 budget. According to Finance Minister Christian Lindner (FDP), the federal government has to plug a hole of 17 billion euros in the federal budget.

The Federal Constitutional Court had declared the reallocation of 60 billion euros in the 2021 budget to the Climate and Transformation Fund (KTF) invalid. The money was approved as a Corona loan, but was subsequently intended to be used for projects for more climate protection and the modernization of the economy. This is now tearing holes in the core budget. The KTF could also be missing billions for the coming year. Adrian warned against concentrating on large projects.

Worries in the economy

“Due to the effects of the energy crisis, electricity prices are still significantly higher than in the past,” said Andreae. “That’s why it was absolutely right for the Bundestag to cap transmission network fees and thus curb end customer prices.” After the extreme increases in energy prices last year, it is now important to signal consistency and reliability to customers.

“If the subsidy were to disappear, this would also trigger a domino effect for companies at various levels of the energy industry’s value chain: If the transmission network fees increase, the distribution network operators will also have to increase their fees,” says Andreae.

“The energy suppliers must in turn take the overall increase in network fees into their price calculations and adjust prices that have already been announced. Due to the legal deadlines, this would no longer be possible by January 1, 2024, but would have to be done as quickly as possible.”

Possible consequences

The network fees are part of the electricity price. If the federal subsidy for the fees for the transmission networks – the electricity highways – ceases to apply, the comparison portal Verivox expects a family with an electricity consumption of 4,000 kilowatt hours to incur additional annual costs of around 100 euros.

The green electricity provider LichtBlick expects an additional burden of almost 170 euros for a household with an annual consumption of 4,000 kilowatt hours if the federal subsidy ceases. Gross electricity costs would increase by 4.15 cents per kilowatt hour. The promised subsidization of transmission network fees, which the electricity network operators have already factored into their network fees, must be maintained.

DIHK President Adrian told the dpa: “The increase in network fees at the turn of the year alone would burden a typical medium-sized company by a six-figure amount if the promised subsidy does not come.”

Other reliefs also at risk?

It is already certain that the state gas and electricity price cap financed by the WSF will expire at the end of the year and not at the end of March as originally planned.

In the coalition’s search for savings, a multi-billion dollar package to relieve industry and medium-sized businesses in view of high electricity prices, which the coalition leaders had put together before the verdict, could also be in question again. Among other things, the electricity tax for all manufacturing companies is to be reduced to the minimum value permitted in the EU.

Around 350 companies that are particularly exposed to international competition and suffer from high electricity prices are to receive additional help. The existing so-called electricity price compensation is to be extended and expanded for five years.

“The federal government must create a balance when setting the course for the budget – between compliance with political commitments for individual industrial projects and the agreed relief for the broad spectrum of network fees and electricity taxes,” said Adrian. “Both are essential to secure the entire industrial value chain.”