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Relief for consumers through the capping of gas prices

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How does a gas price brake work?

A price cap represents an upper limit that has been set in advance. The government thus determines a fixed price. This is the maximum financial value that utility companies may charge households for the energy provided. If the purchase price for the gas exceeds this fixed price, the state assumes the financing of these additional costs, and not the end consumer. The fixed maximum price, also known as the price cap, will apply to 80 percent of consumption and the remaining 20 percent will be 12 cents gross per kilowatt hour, with the guaranteed maximum price is 9.5 cents gross. To bridge the gap until the introduction of the price brake, which is expected to take place in January 2023 for companies and in March for private households, the state will assume the cost of the monthly down payment to gas suppliers in December by means of a one-time payment.

Impact on consumers

For end customers, the cap on current natural gas prices means important financial relief, because the price of gas is expected to skyrocket in the coming winter as well. The price brake allows you, the consumer, to calculate the cost of gas consumption more reliably, if you consistently keep track of your consumption. This also eliminates the need to compare gas prices, as the cap applies equally to all gas suppliers. However, experts emphasize that saving energy and gas remains paramount to avoid a potential gas shortage this the winter. They state that gas consumption needs to be reduced by 20 to 25% in order to ensure a secure supply throughout the winter. However, a price brake not only provides relief regarding the direct consumption costs, but it also helps to reduce inflation, which is primarily driven by rising energy prices.

A total of nine countries in the EU have already introduced a price cap for gas

Design of the price cap in Germany

The basis of the standard consumption is the installment payment from the month of September 2022. This standard consumption is capped at 80 percent via the price brake. For example, if a household with three people consumes 12,000 kWh of gas in the previous year, it will receive a quantity of 9,600 kWh at the fixed price. Gas consumption in excess of this is not capped in terms of price. This is intended to create a continued incentive to reduce gas consumption despite the price cap. If the necessary 20 to 25 percent is saved, the entire consumption falls under the gas price cap. This support will be financed by a so-called defense fund of 200 billion euros, the resources for which will be taken from the Economic and Stabilization Fund. In addition, the government debt brake has been suspended in order to finance this. As it stands now, the plan is to leave the cap in place until spring 2024.

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Written by:

Stefanie Aust, Guest Writer

Stefanie loves to put complex topics from the real estate world into understandable and inspiring words. Whether it's about the right financing, choosing the right type of flat, or a successful property search: Stefanie is happy to inform you.

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