Germany extends household gas and electricity price caps and tax breaks

The German government has extended its subsidies to essentially cap gas and electricity prices, and a lower value added tax rate on the fuels to shield consumers from excessive financial burdens during the winter. Parliament agreed to extend the price cap, which would have expired at the end of the year, until late March, reported Zeit Online. Yet, following energy price drops over recent months, the total amount of relief given out will only be marginal as most consumers pay already less than the price cap level, according to calculations by price comparison website verivox. The government had planned to prolong the price cap until late April, but parliament decided to shorten the extension by one months following concerns by the European Commission, which must greenlight the measure. According to a report by news portal ntv, parliament will also agree to extend a cut on the value added tax on the fuels to 7 percent from 19 percent until the end of February.

The German government introduced the price caps for electricity and gas in March — valid retroactively from the start of the year —  to protect consumers from the price effects of the war in Ukraine and the halt of Russian gas supply to Germany. Prices are capped for the majority of private household consumption at 40 cents per kilowatt hour for electricity and 12 cents per kilowatt hour for gas. Verivox said most households will see little effect, given that the measure will reduce average electricity prices by a mere 0.3 percent, and gas prices by 1.1 percent, adding up to savings of little over 30 euros in an average household. But the economy ministry called the extension of the price cap "an insurance policy against unexpected risks."