German gas storage levy adds to energy consumers’ woes

A charge to fund gas imports into Germany to boost national stocks has been set at 0.59 euro per megawatt hour (MWh), gas market operator Trading Hub Europe said on Thursday, feeding into a sharp rise in consumer energy costs.

The gas storage levy, set to kick in from Oct. 1, comes on top of another levy on end-consumers designed to distribute the cost of replacing Russian gas to utilities like Uniper .

This will already cost an average family of four an additional annual 480 euros ($488), according to price platform Verivox' assessment, while Thursday's charge will add an additional 13 euros, a spokesperson for competitor Check24 said.

However, to cushion the blow to consumers, Chancellor Olaf Scholz said sales tax on gas would be reduced to 7 per cent from 19 per cent.

The levies are part of a new energy security law Germany drew up this year in response to a drop in gas exports from Russia, which has become embroiled in an energy stand-off with the West since Moscow's invasion of Ukraine in February.

This will already cost an average family of four an additional annual 480 euros ($488), according to price platform Verivox' assessment

The new law obliges Germany's gas market operator THE to tender for additional gas purchases on top of regular ones it carries out to balance supply and demand, and potentially to buy outright on the open market, sidestepping its usual tender process, if necessary to top up reserves.

The cost of the measures is initially charged to gas suppliers on the pipeline grid. That cost is then rolled over, under a supervised mechanism, all the way to end customers.

Customers must by law be notified of the levy six weeks before the proposed Oct. 1 start date.

The storage levy, which will remain in place until April 2025, will be first calculated in the fourth quarter of 2022 and then every six months after that.

Economists have warned that the two new levies will further accelerate inflation in Europe's largest economy.

Scholz, who has promised to help households cope with higher gas bills, announced a reduction in sales tax while the levies are in place.