Bills for millions of gas and electricity customers are getting cheaper. Since midnight, the government price brakes, worth billions, have been in effect to dampen the drastically increased energy costs. The advance payments are reduced. There is also retrospective relief for January and February. The Federal Ministry of Economics speaks of a “kind of insurance against excessively high energy prices”.

Why are the price brakes coming?

The federal government had decided on the cap last fall in view of the rise in energy prices – a previously controversial gas levy that all gas customers would have paid was off the table. The price brakes are paid from a federal “defense shield” worth up to 200 billion euros, which is a special fund financed by debt. How much the brakes ultimately cost depends on how energy prices develop. In part, there is counter-financing, because “surplus proceeds” caused by the crisis are skimmed off by electricity producers.

Wholesale prices on the markets have recently fallen significantly again. The Federal Ministry of Economics explained that the instruments of the gas and electricity price brake are still important in order to stabilize prices. Developments in wholesale prices always reach the end customer later.

Criticism was caused by the fact that many suppliers have increased their prices in recent weeks and months. The energy industry referred to higher procurement costs. The Federal Association of Energy and Water Industries (BDEW) defends itself against “general statements of suspicion”.

The Stadtwerkeverband VKU states that although energy prices have fallen in wholesale, the current price level is still at least twice as high as before the crisis. The authorities would have sufficient powers to investigate and punish abusive behavior.

Karsten Neuhoff, head of the climate policy department at the German Institute for Economic Research in Berlin, said: “Most gas suppliers bought the gas last year – at the then much higher prices – or they have long-term contracts, for example with Norway, which mostly Prices of the previous year are indexed.” This is reflected in the tariffs for gas customers.

How do the energy price brakes work?

The caps already apply to large industrial consumers. For private households, small and medium-sized companies, the gross gas price will be capped at 12 cents per kilowatt hour from the beginning of March. This applies to 80 percent of the annual consumption forecast in September. So if you pay more than 12 cents, the monthly deductions will decrease.

For each kilowatt hour in excess of 80 percent, customers have to pay the fixed energy price of the respective tariff. This should give an incentive to save energy: the less gas you use, the lower the consumption, which is above the price brake – and the less you pay. The message is also: The energy crisis is not over yet.

The gross electricity price for private consumers and small and medium-sized companies is capped at 40 cents per kilowatt hour. Here, too, this applies to a requirement of 80 percent of the forecast consumption.

According to the current regulations, the price brakes expire on December 31, 2023. An extension up to April 30, 2024 is laid down in the law, but according to the Ministry of Economic Affairs depends on European requirements.

What does this mean for consumers?

Consumers don’t have to worry about anything, say Vattenfall or Eon, for example. The advance payment will be reduced accordingly, the customers will be informed. Tenants should usually receive the relief via the heating bill, which will then come in the coming year.

VKU general manager Ingbert Liebing said that all companies have been working together with their IT service providers for months to implement the price brakes on time. Many customers have already received information letters from their energy suppliers with detailed information on the relief. “Even if there are unwanted delays in the implementation of the energy price brakes: All consumers will get their relief.”

BDEW general manager Kerstin Andreae said that the laws on energy price brakes were so complex that their practical implementation was a “mammoth task”. IT systems for over 40 million households and thousands of companies would have to be converted. The implementation of the relief on the energy suppliers is an absolute novelty.

In an exceptional situation, the energy industry was assigned the task of processing the relief – because the state currently has no legally secure and practicable basis with which it can pay such price brakes or financial aid directly to the citizens. That must change as soon as possible.

How much is the relief?

How high the relief is depends on the respective consumption and tariff. Many suppliers have a relief calculator on the Internet that can be used to calculate the individual relief. According to calculations by the comparison portal Verivox, a family that is in the local basic supply tariff is relieved on average by around 718 euros for gas and around 216 euros for electricity – with a consumption of 20,000 kilowatt hours of gas and 4000 kilowatt hours of electricity.

The nationwide price for new customers is 35.9 cents/kWh for electricity and 11.2 cents for gas. Households could make the price brakes unnecessary by switching to a cheaper tariff. But that is not always possible, according to Verivox energy expert Thorsten Storck. “Anyone who, for example, concluded a contract at high prices with a longer term in the past year must first wait for the end of the contract period. That is why the price brakes are still important.”

Energy prices are currently developing positively for consumers, said Steffen Suttner, the energy expert at the comparison portal Check24. It is expected that the prices for new customers will continue to fall in the coming weeks. “Then the price brakes will be used less.” However, the development remains dependent on global political events and the filling levels of the gas storage facilities.

What about oil and pellets?

The federal government has also announced a hardship rule for private consumers who use other heating media, such as oil or pellets – the prerequisite is massive price increases. For weeks, however, the federal and state governments have been negotiating the details. The federal government wants to make up to 1.8 billion euros available, the states should take care of the applications and payment.