Germany to cap electricity prices by taxing excess profits

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Germany’s government plans to introduce a cap on electricity prices for households and industry to ease the impact of soaring energy costs, a ministry document seen by Reuters on Wednesday showed.

To help finance the cap and pay for the stabilization of power transmission grids, Berlin is considering skimming off some of electricity companies’ profits, the document showed.

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The scheme would also be financed by a 200 billion euro relief package Chancellor Olaf Scholz’s government announced late last month to help households and companies cope with soaring energy prices in Europe’s largest economy.

The document did not, however, specify how much funds would be drawn from the package and how much from the levy to finance the cap.

The cap would be based on the previous annual electricity consumption. Its design would be similar to a price brake for gas, details of which the government announced earlier this month, the document showed.

Unlike the proposed government relief for gas consumers, the draft does not include a one-off payment worth one month’s electricity bill this year.

As part of the plan, Berlin may skim off 90 percent of the power profits that electricity companies make above production costs, the paper showed. For spot prices, the levy would apply retroactively from March, and for future prices from December, it said.

The document, to be presented to Germany’s cabinet on Nov. 18, said prompt and future power had been hit by runaway wholesale power prices as a lack of gas drove up prices. The overall energy scarcity also stretches to crude oil and coal.

The paper, from Germany’s Economy Ministry, showed that power production from hard coal, gas and biomethane would not be included in the measures, due to their higher production costs.

Italy and Britain have implemented similar levies, while Spain has introduced a temporary one.

Last month, the European Commission set the framework for windfall profit levies on energy firms, but upon Germany’s insistence the Commission left a lot of leeway for the bloc’s members to design their own measures.

In Germany, the levy would still account for companies’ basic costs depending on the type of energy generation. For example, it would account around 10 euro cents ($0.098) per kilowatt hour for renewable energies, in addition to 3 cents per Kwh as a so-called security surcharge.

Nuclear energy would get 4 cents per Kwh, plus the 3 cent security surcharge.

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