Germany Targets Windfall Profits to Finance Power Price Subsidy

Article content

(Bloomberg) — The German government plans to collect windfall profits from electricity companies despite legal uncertainties about the proposal, according to a government paper seen by Bloomberg.

Article content

The money, which will be collected retroactively from September 2022, will be used to finance electricity subsidies for companies and households as part of a policy that will go into effect as soon as this January. In an earlier leaked draft paper, the government had planned to begin skimming profits in March, which several experts said at the time would be unconstitutional.

Article content

In accordance with EU regulations, the government will cap the collection of windfall profits at 90%, and energy producers will be permitted to keep the rest to promote future investment. For consumers, 80% of household power use, as based on last year’s consumption levels, will be billed at 40 cents per kilowatt hour, the same as the gas subsidy. For industrial consumers, 70% of power use will be capped at 13 cents per kilowatt hour.

In addition to the windfall profits, electricity subsidies will be financed by Germany’s €200 billion ($197 billion) Economic and Stabilization Fund, which was created to mitigate the impact from the Covid-19 pandemic. Some €30 billion from the fund has been earmarked for power market intervention. According to the government paper, exact costs will be determined in part by market prices.