Germany’s Bundestag approves price cap for gas, electricity

Germany's lower house of parliament on Thursday approved a legislation to cap gas and electricity prices for consumers and companies.

Some 372 deputies of the Bundestag-mostly from Chancellor Olaf Scholz's liberal-left coalition government-voted in favor of the legislation, while 257 deputies voted against the government's plan.

The price caps are the cornerstone of a €200 billion ($213 billion) package announced by the government in September to protect households and industrial enterprises from high energy costs.

If also approved by the Bundesrat, the upper house of the parliament, on Friday, the measures will come into effect in early 2023 and last until April 2024, according to the government.

With the price caps, households will be able to obtain 80% of their typical gas usage at a reduced rate of 12 cents per kilowatt hour. For industrial enterprises, the gas price brake is to apply for 70% of their typical consumption, and the price is to capped at 7 cents per kilowatt hour.

The electricity price per kilowatt hour will be capped at 40 cents for households, as well as small and medium-sized companies. The reduced rate will apply for the typical consumption, which will be equal to 80% of the previous year's consumption.

For industrial enterprises, electricity prices will be capped at 13 cents per kilowatt hour for 70% of the amount used in the previous year.

The package will be financed by new government borrowing.

- SEVERE ENERGY CRISIS

Germany is facing a severe energy crisis due to the ongoing Russia-Ukraine war, which led to disruptions in the gas supply and pushed energy prices to record highs.

The government introduced energy saving rules in the autumn with the goal to reduce gas consumption by 20%.

The government is also seeking to diversify natural gas supply sources by purchasing more gas from Norway and increasing imports via pipelines from Belgium and the Netherlands. It is also building liquefied natural gas terminals in northern Germany.

Since the explosions in the Nord Stream undersea pipelines in September, Germany has been importing no gas from Russia.

Before the start of the war in Ukraine in February, Russia was supplying 55% of Germany's natural gas.