Germany’s government has passed a draft law to cap the price of gas and electricity by permitting a fixed supply volume at lesser rates for customers. The price caps will become effective from March 2023 but will also retroactively cover higher costs in January and February 2023, and will continue to remain in use at least till April 2024.

“The levy will be designed in a way that leaves an adequate share of the proceeds to guarantee profitable operations, but also ensures that a substantial contribution is made towards relieving customers and the economy,” Germany’s federal ministry for economic affairs and climate action said in a statement.

The price caps are a crucial part of the German government’s €200 billion ‘defence shield’ against the energy crisis and will also be funded by windfall profits earned by electricity producers after December 1, 2022 until June, 2023, which may even be extended to April 2024, according to several German media reports.

The gas price cap is 12 cents/kWh for small companies, households, and public institutions, and will apply to a consumption level equal to 80 per cent of the estimated annual consumption. Consumption extending this limit will require consumers to pay higher market rates. Larger industrial customers will be provided a price cap of 7 cents/kWh for gas, which will apply to 70 per cent of their consumption for 2021.

Moreover, household and small companies will have an electricity price cap of 40 cents/kWh for 80 per cent of estimated consumption. Larger industrial companies will be charged 13 cents/kWh that will cover a volume equal to 70 per cent of the previous year’s consumption.

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