Gas and Heat Commission presents final report

The Expert Commission on Gas and Heat set up by the German Federal Government handed over its final report to Chancellor Olaf Scholz, Federal Minister of Economics Robert Habeck and Federal Minister of Finance Christian Lindner at the Federal Chancellery. In its interim report presented on 10^th October, the Commission had already proposed to relieve gas and district heating customers in two steps. According to this, the state is to take over the deductions completely in December. The gas price brake is to follow from March 2023.

The Commission emphasises that the cost burden on gas consumers will not be reduced to pre-crisis levels. Rather, the measures are intended to cushion the particularly high burdens that will fall on gas consumers until the "New Normal" is reached, i.e. the cost level expected in the medium term. This is to prevent the massive price increases expected in the coming year from overburdening the economy and society. 

The final report also focuses on measures to increase gas supply and reduce demand: 

• Efforts to jointly procure gas in Europe or to make additional gas volumes available in Germany and Europe should be consistently pursued. In addition, all reasonable measures should be taken to increase capacities for electricity generation in Germany in the short term and at the same time reduce the need for gas-fired power generation. The focus should be on the expansion of renewable energies, and this should be accelerated considerably. 

• In order to achieve the national gas savings target of at least 20 percent, consumers should be informed better and more frequently about their gas and heating consumption. By means of financial bonuses (savings premiums) in the form of a fixed amount, an additional incentive is to be created to achieve the savings target, especially in households whose heating costs are generally covered. 

• The Commission additionally recommends transformative steps that also save gas in the short term. These include investments in energy efficiency and heating technologies, a change of energy sources and the renovation of buildings. Priority should be given to particularly inefficient gas-heated apartment buildings as well as schools and hospitals. In addition, funding opportunities are to be expanded and a strategy is to be developed for the use of waste heat. 

For large companies, the gas price brake will take effect from 1^st January 2023. It was specified by the Commission in its final report and linked to certain conditions: 

• The gas price brake for large industrial consumers (around 25,000 companies) was initially still subject to the EU's state aid review. After intensive talks at the end of last week, the Federal Government was able to reach an agreement on it, so that the basic idea of the gas price brake for companies can enter into force as planned on 1^st January. Compared to the Gas Commission's original proposal, there are several technical adjustments. However, there will be neither an individual application procedure at company level nor changes to the Gas Commission's proposal for the quota that can be relieved (70 percent) and the procurement price (seven cents per kilowatt hour). However, companies must register participation in the programme with their supplier (opt-in) and make it public. 

• The Commission also proposes that the support only be granted to companies that maintain the sites concerned. Site retention is to be demonstrated by a site- and transformation agreement between collective bargaining or operating parties (employer/works council) or in the supervisory board with equal co-determination. If, in exceptional cases, such co-determination structures do not exist, companies must prove long-term retention of at least 90 percent of jobs for at least one year beyond the end of the support. Otherwise, they must repay the support received. 

In both the household and business sectors, there are likely to be many consumers who will be overwhelmed by the "New Normal", i.e., the high level of energy costs that is expected in the medium term. Regardless of which energy source they use, these consumers should be relieved further. Therefore, as accompanying measures, the Commission recommends for all consumers: 

• From 1^st January 2023 to 30^th April 2024, there should be an emergency aid fund, which is directed at households with lower and middle incomes who cannot shoulder the burdens themselves, regardless of the type of energy source. The basis will be income and the amount of energy costs. Landlords who pay in advance for their tenants in the event of extreme price increases for gas and district heating should also receive interest-free liquidity assistance. Likewise, there is to be a relief fund for social service providers, such as hospitals or nursing homes. 

• A moratorium on cancellations is also recommended: private households should be given at least six months to settle their energy debts. This assistance must be maintained until the Housing Benefit Plus proposed by the Federal Government is fully administered and citizens have their entitlements paid out. 

• A hardship programme should be set up for companies from 1^st January 2023 until the end of the gas price brake, which can be designed along the lines of the credit programmes from the Corona pandemic. It is important to avoid putting gas consumers in a more favourable position than consumers of other energy sources. 

The three chairpersons of the Commissions for Gas and Heat on the final report: 

Veronika Grimm, Member of the German Council of Economic Experts: "The challenge is to relieve the burden on households and companies in the most targeted way possible while maintaining the incentives to save gas. In a very short time, the Commission has compared various proposals for relief with what is feasible and presented recommendations. We had science and practice work together in the Commission and developed results constructively. This was a good approach by the Federal Government and a key to broad social acceptance of our proposals." 

Siegfried Russwurm, President of the Federation of German Industries: "It was important for us to reconcile what was desirable and what was feasible, i.e. to provide rapid and practicable relief, to maintain incentives to save and to build a bridge to the “New Normal” of higher energy prices in Germany. I would like to thank all the members of the Commission. It was clear to all what was important: to give households and businesses a reliable, resilient orientation. Now the ball is in the Federal Government's court." 

Michael Vassiliadis, Chairman of the Mining, Chemical and Energy Industries Union: "The final report presents comprehensive starting points for a quickly effective and realisable relief for households and companies and makes precise proposals for saving gas. It is important that the companies receiving state aid must at the same time dedicate themselves to safeguarding their locations and jobs. They should do this in the most demonstrably flexible and effective form: In social partner agreements. In exceptional cases, where neither workers’ councils nor supervisory boards exist, a less flexible blanket arrangement will apply." 

BDI comments on the final report of the Expert Commission for Gas and Heat:  

"The gas price brake is a short-term crisis instrument that is intended to prevent gas consumers from experiencing existential hardship due to uncontrollable price developments. It is an instrument that is intended to create a degree of security and at same time reduce worries for a clearly defined period of time until the end of the 2023/24 heating period. Creating these fears is Russia's tactical goal in the course of its war against Ukraine in order to unsettle the people in Europe. 

For the Expert Commission on Gas and Heat, it was important to set clear incentives for savings and at the same time to establish an energy cost level that, from today's perspective, should correspond to the “New Normal”, the energy prices after the current market turmoil. This “New Normal” will be significantly higher than the pre-war level. The gas price brake is compatible with EU measures to tackle the energy crisis. 

From an industry perspective, it is positive that relief can now begin quickly and effectively. It is also positive that there are no individual application procedures. The level of the procurement price of seven cents per kilowatt hour is demanding, as it is a factor of two to three above pre-war prices. Companies will have to make great efforts to maintain their global competitiveness with this cost level. The restrictions and conditions for the relief, the observance of which means additional effort for the companies, are kept within reasonable limits. 

In recent weeks, the German Federal Government has negotiated very intensively with the EU Commission to shape the European state aid framework in such a way that the structure, intention and substance of the gas price brake are also applicable to industrial companies. This seems to have been largely successful. 

It is now important to get clarity very quickly on the precise steps for implementing and calculating the relief. A coordinated process between the Federal Government, industry and the energy sector is urgently needed for this."