Guaranteeing affordable gas supplies

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Updating the Energy Security Act Guaranteeing affordable gas supplies

The situation on the energy market has taken a sharp turn for the worse. The Federal Government is therefore changing the law to create new ways of responding flexibly to the tense gas market. In real terms, this means adapting gas prices and being able to stabilise energy companies.

4 Min. Lesedauer

Russia’s illegal attack on Ukraine and the throttling of Russian gas supplies have caused massive upheaval on the energy markets. Gas supplies are currently affected by disruptions . The supply situation has worsened considerably.

In order to guarantee energy supplies in Germany, the Federal Government has set in motion further changes to the law so as to give a boost to crisis prevention and the tools available to overcome this crisis. This requires amendments to the Energy Security Act and other pieces of legislation. In a written circulation procedure on 5 July the Federal Cabinet adopted a draft wording for the governing coalition parties in the Bundestag. Parliament gave its approval on 7 July. Having received parliamentary approval, the amendments were passed by the Bundesrat on 8 July.

Federal Minister for Economic Affairs and Climate Protection, Robert Habeck, said: “The situation on the gas market is tense and unfortunately we cannot exclude the possibility of things getting worse. We must prepare for the situation worsening. That is why we are refining the tools at our disposal by amending the Energy Security Act and the Energy Industry Act. This is about doing all we can to ensure basic supply, both now and in the coming winter, and also to keep the energy markets going for as long as we can, despite high prices and growing risks.”

Spreading costs fairly

Under certain tightly regulated conditions, energy suppliers may adjust the gas prices they charge to customers to a level that allows them to respond to increased purchasing costs. The amendment provides a replacement for this right to adjust prices in the form of a so-called “balanced price adjustment”. The principle behind it is similar to the now defunct Renewable Energy Sources Act, whereby costs can be passed on to all end customers as a price component. This allows the Federal Government to issue decrees so as to distribute cost burdens equally across all gas customers and users.

As a precondition for any price adjustments, the Federal Network Agency must identify a significant reduction in gas imports to Germany. At present, there are no plans to activate the original right to adjust prices or rights to make “balanced price adjustments”. The intention is for them to be available as options, as it is important to ensure energy markets can continue to function. Opportunities to impose surcharges will bolster gas importers who have to meet the increased costs of purchasing gas so as to avoid getting into financial difficulties. This would have negative implications for the market as a whole and for supply security.

At the same time, the draft law increases consumer security by making it clear that energy supply companies cannot simply go ahead and reduce the gas they supply to customers if their own supplies are reduced or interrupted. The Federal Network Agency must now approve cases where companies exercise their right to refuse service under normal circumstances. This ensures the reliability of the gas market.

Stabilising critical infrastructure

Companies that carry out essential tasks for supply security are counted as critical infrastructure. There are ways that the Federal Government can support these companies. Regulations already in place have helped stabilise the economy following the coronavirus pandemic. The draft law provides time-limited relief so that the Federal Government can swiftly buy shares in businesses when they apply for help. The Federal Government is aiming to arm itself against further tensions in the energy markets so as to be able to respond quickly to protect supply security. Under the new law, stabilisation measures will take priority over price adjustments.

Expanding ways of saving gas

The draft law to ensure back-up power generation also includes amendments. The option to reduce gas supplies and increase the use of coal and oil has been extended: it is now available for nine months rather than six. This is necessary to conserve gas. This extension ensures that the option remains available until the end of the coming winter.

Making it easier to use alternative fuels

All consumers, from industry to public institutions and private households, should reduce their gas consumption as far as possible to ensure supplies are available for the winter. In this context, the fuel transformation in industrial facilities is of critical importance to reducing gas consumption in the industrial sector as a whole. The draft law makes it easier to switch from gas to alternative fuels.

Mandating energy saving

The amendments will also allow authorities to mandate energy-saving measures or to temporarily ease environmental regulations, even before a crisis occurs.