Caps on energy prices

On 24 December 2022, the Act on the Introduction of an Electricity Price Cap (the “Electricity Price Cap Act” ) and the Act on the Introduction of a Cap on the Price of Pipeline-Based Natural Gas and Thermal Heating (the “Gas and Thermal Heating Price Cap Act”) came into force. The purpose of these two important statutory instruments is to reduce the financial burden on consumers resulting from the recent sharp rise in energy costs. Both pieces of legislation also provide extensive financial relief for companies. If a company wishes to take advantage of the envisaged relief, it should pay particular attention to the relief ceilings under EU State aid law, the deadlines for satisfying notification obligations, the duty under both Acts to save jobs and the applicable ban on bonuses and dividends. The requirements and obligations that apply to companies will depend largely on the amount of relief they receive and on the sector in which they operate.

Relief under the Electricity Price Cap Act

As part of the electricity price cap, electricity customers who consume less than 30,000 kWh of electricity per year will receive 80% of their previous electricity consumption at a guaranteed gross price of 40 ct/kWh, while those who consume more than 30,000 kWh of electricity per year will receive 70% of their previous electricity consumption at a guaranteed net kilowatt hourly price of 13 ct/kWh. In addition, grid charges, taxes, levies and surcharges will apply. Energy suppliers will charge for consumption above these quotas at the price contractually agreed with the customer. The calculation of the quota for which the electricity price is capped will depend on the type of delivery point. If a standard load profile is used for calculating the price, the grid operator’s current estimate for the customer’s annual consumption will be used as a basis for calculating the customer’s quota. In such case, the quota for which the price is capped will be 80% or 70% of estimated annual consumption. Otherwise, for example, in the case of real-time metered customers, the quota for which the price is capped will be 80% or 70% of consumption in 2021.

For companies that procure their own electricity (“self-suppliers”) through imports or purchases on the stock exchange rather than from energy suppliers, the relief granted will be calculated separately.

Relief will be automatically granted through instalments or advance payments agreed with different energy suppliers or invoices issued by them. In the case of self-suppliers, relief will be granted by the transmission system operator responsible for their control area. The companies affected will not need to apply for a subsidy.

Relief under the Gas and Thermal Heating Price Cap Act

Under the cap on the price of gas and thermal heating, consumers of natural gas and thermal heating whose annual consumption is up to 1.5 million kWh per delivery point ‒ in the case of natural gas, this will include consumers who are charged on the basis of a standard load profile and smaller companies ‒ will receive a quota of 80% of their estimated annual consumption in September 2022 at a guaranteed gross energy price of 12 ct/kWh (natural gas) or 9.5 ct/kWh (thermal heat). Consumption above these quotas will continue to be charged at the contractually agreed price. Large industrial consumers who consume more than 1.5 million kWh of gas per year (e.g. real-time metered customers) will receive a quota amounting to 70% of their gas consumption at a guaranteed net kilowatt hourly price of 7 ct/kWh based on their annual consumption in 2021. For purchases of thermal heating, large industrial consumers will receive a quota amounting to 70% of their annual consumption in 2021 at a guaranteed net kilowatt hourly price of 7.5 ct/kWh.

The group of consumers described above will be granted relief from March 2023. They will not be required to apply for relief because it will be granted automatically through the instalments and advance payments agreed with energy suppliers. In March 2023, the consumers concerned will receive a credit for three times the relief amount so as to retrospectively cover the months of January and February 2023 as well. On the other hand, relief for large industrial consumers of gas and thermal heating begins in January 2023 as companies affected did not receive emergency aid under the German Natural Gas and Thermal Heating Emergency Aid Act in December 2022.

The relief granted to companies that procure their own natural gas (“self-suppliers”) will be calculated separately.

As a rule, companies entitled to relief will not need to apply for a subsidy. It is only those companies that procure natural gas on the gas wholesale market for their own consumption that must apply for relief using the application portal established for this purpose (https://gaswaermepreisbremse.pwc.de) (cf. sections 35(1) and 7(2) of the Gas and Thermal Heating Price Cap Act.)

EU State aid ceilings for relief under the Electricity Price Cap Act and the Gas and Thermal Heating Price Cap Act

Section 9 et seq. of the Electricity Price Cap Act and section 18 et seqq. of the Gas and Thermal Heating Price Cap Act implement the ceilings on the relief that companies, including their affiliates, are permitted to receive as State aid under EU law. The ceilings apply not only to relief under the Electricity Price Cap Act and the Gas and Thermal Heating Price Cap Act, but also to the total relief and subsidies that a company or group of companies is entitled to claim before 1 January 2024 as a result of the energy crisis. This includes, among other things, relief received under the Natural Gas and Thermal Heating Emergency Aid Act and subsidies under the Energy Cost Reduction Programme.

The applicable relief ceiling for a company or group of companies must be determined on a case-by-case basis and will depend on the impact of the high energy prices on the company or group of companies and the sector to which the company or group of companies belongs. Where relief of over €4 million is sought, the ceilings to be applied in each case will be bindingly determined by an audit authority to be specified (section 11 of the Electricity Price Cap Act and section 19 of the Gas and Thermal Heating Price Cap Act). In future companies affected will have to apply to the audit authority for such a determination.

Notification obligations of companies

If the relief received by companies in 2023 exceeds €100,000.00, they should comply with the notification obligations and deadlines in relation to energy suppliers, audit authorities and transmission system operators, which are laid down in section 30 of the Electricity Price Cap Act or section 22 of the Gas and Thermal Heating Price Cap Act. For companies active in the primary production of agricultural products or in the fisheries and aquaculture sector, notification obligations apply as from receipt of relief amounting to €10,000.00.

Job retention obligation

If a company wishes to claim relief of over €2 million, it must pursuant to section 37 of the Electricity Price Cap Act or section 29 of the Gas and Thermal Heating Price Cap Act prove to the audit authority by 15 July 2023 that it has included a provision in a collective agreement or works agreement guaranteeing its employees their jobs until at least 30 April 2025 (“job guarantee agreement”). Alternatively, companies affected may submit a declaration in which they undertake to maintain, at least until 30 April 2025, a workforce that is the equivalent of at least 90 per cent of the full-time equivalent jobs in their company on 1 January 2023. If they do not provide proof on a timely basis that they have satisfied their job retention obligation, the relief granted will be capped at a maximum of €2 million.

Ban on bonuses and dividends

Section 37a of the Electricity Price Cap Act and section 29 of the Gas and Thermal Heating Price Cap Act provide for a ban according to a scale on the payment of bonuses and dividends by companies that receive total relief exceeding €25 million or €50 million. If a company receives relief in the range of €25 million to €50 million, the ban will only apply to bonus agreements or bonus resolutions after 1 December 2022. On the other hand, where the relief a company receives exceeds €50 million, the ban will extend to all bonus agreements and the distribution of dividends. The bans apply to bonuses and dividends for the year 2023, regardless of when they are actually paid out.

Companies affected may submit a declaration to the competent audit authority by 31 March 2023 confirming that they will not claim relief exceeding €25 million under the Electricity Price Cap Act or the Gas and Thermal Heating Price Cap Act. This “opt-out” provision allows companies to avoid the application of the ban on bonuses and dividends .