Pipeline, price and politics What to expect if energy costs continue to rise?
Many private households are now paying double the price for heating and hot water. What should policymakers do if costs continue to grow due to the Russian supply freeze through the Nord Stream 1 pipeline?
A letter from a property management company came as a surprise. It announced an approximate doubling of the costs for heating and hot water. While the addressee paid about 800 Euro in 2021, about 1600 Euro will be due this year. The monthly rate rose from about 65 to 135 Euro. That was before the Russian attack on Ukraine. And also before the gas flow through the Nord Stream 1 pipeline dried up this Monday.
Like the twelve owners in their house in Berlin-Kreuzberg, many property owners and tenants are now feeling the same way. The doubling of the gas price is a trend. The Association of Electricity Suppliers (BDEW) and the price comparison portal Check24 agree on this. While the gross price per kilowatt hour of gas for private households was around seven cents in 2021, it is now heading towards 14 cents.
According to the comparison portal Verivox, however, such increases have so far only affected about a third of households, be it in the form of considerable additional payments for the past year or higher instalments for this year. In addition, the relief that the federal government has already decided on must be taken into account. According to a recent calculation by the trade union Hans Böckler Foundation, these cover half of the additional costs for families with two working adults, two children and a monthly net income of 2,000 to 2,600 Euro.
Further development is not predictable
However, the further development is not predictable. If Nord Stream 1 is not switched on again after the regular maintenance in ten days and the Russian gas fails completely, the autumn and winter could be dramatic. There is a lack of concrete forecasts for the feared price increase. BDEW and Verivox are holding back.
No wonder - it could just be conjecture. Klaus Müller, the head of the Federal Network Agency, only said some time ago: "If the screw is tightened further, even if it is only small steps, gas will become even more expensive."
An example of calculation: if gas prices climbed by another 50 per cent from today's level, families living in their Berlin home would soon have to pay 2400 Euro per flat per year - three times as much as in 2021. That would mean around 200 Euro a month instead of 65 Euro in the past. And this is perhaps not yet the highest point.
For many citizens, such a level of heating costs poses a threatening problem. This particularly affects the scant fifth of the population that lives at or below the poverty line. Not quite as hard, but still serious, is the situation for average households that have around 2200 Euro per month at their disposal. For them, showers and heating suddenly cost a tenth of their income. But the truth is also that millions of citizens do not really have to worry about rising energy costs. Households with a disposable income of 3,000, 4,000 or more Euro can cope with the price jumps. Probably 40 percent of the federal population do not need to reduce their standard of living.
Scholz holds out the prospect of additional relief
Politicians are now trying to cope with the difficult situation. Economics Minister Robert Habeck (Greens) has just had a new mechanism written into the Energy Security Act. In an emergency, large price jumps could be passed on to all gas consumers. Individually, particularly affected households would then be spared a little, while all would receive an average cost increase. It would be more expensive in any case - but evenly distributed.
A second option would be to politically set an upper limit for the gas price - a cap. This was demanded by Yasmin Fahimi, chairwoman of the trade union confederation DGB, and the Left Party, among others. However, the state would then have to pay the companies the difference between the low cap and the high purchase price, a potentially expensive undertaking. Moreover, all households would be supported, including the wealthy, who would not need a subsidy.
Environment and Consumer Affairs Minister Steffi Lemke (Greens) proposed thirdly a "moratorium on electricity and gas freezes". This means that poor households would continue to be supplied with fuel even if they can no longer pay. Details unclear.
Chancellor Olaf Scholz (SPD) basically held out the prospect of additional relief. The most effective and cost-saving measure for the state would be to concentrate payments on those sections of the population in material difficulties. Meanwhile, the city administration of Tuttlingen in Baden-Württemberg is already considering providing warm rooms in public buildings for those citizens who can no longer afford to heat their homes.
Original text: Hannes Koch
Translation: Mareike Graepel
