energy industry

FAST FACTS: Europe’s efforts to shield households from soaring energy costs

Reuters
FAST FACTS: Europe’s efforts to shield households from soaring energy costs

ENERGY CONSERVATION. The Cologne Cathedral is illuminated before the lighting is switched off at 11 pm to save energy due to Russia's invasion of Ukraine, in Cologne, Germany, August 9, 2022.

Thilo Schmuelgen/Reuters

Here are some of the policies announced by Britain and European Union member states to cushion the impact of rising power bills

Europe is facing a sharp rise in power bills driven by skyrocketing gas prices, as war in Ukraine and European sanctions on Russia heighten concerns over the security of gas supplies.

Below outlines some of the policies Britain and European Union member states have announced to help shield consumers (in alphabetical order):

Britain

Britain has a price cap on the most widely used household energy contracts. The price cap from October will be announced on August 26.

The forecasting group Cornwall Insight estimates that average British annual bills for gas and electricity will jump to 3,582 pounds in October and 4,266 pounds in January. Earlier this year, the price cap was 1,277 pounds.

The government is facing growing calls to provide more support to households struggling with energy bills, but Prime Minister Boris Johnson has said he will leave major fiscal decisions to the new prime minister.

The Conservative Party leadership contest between Foreign Secretary Liz Truss and former finance minister Rishi Sunak runs until September 5.

Truss has said she would apply a temporary moratorium on environmental and social levies added to consumers’ electricity bills.

Sunak has said he is in no doubt more support will be needed to help households through the winter, and he would act as soon as it is confirmed how much bills would be increasing by.

In May, when Sunak was finance minister, the government set out a 15-billion-pound ($18.17 billion) support package to help households. Every household will receive a 400-pound credit to their energy bills from October.

More than 8 million low-income households in receipt of state benefits are also being given a further one-off payment of 650 pounds. Pensioners and people with disabilities will also receive additional help.

Bulgaria

Bulgaria in May approved a 2-billion-levs ($1.1 billion) package aimed at shielding companies and low-income consumers from the surge in energy and food prices caused by the Ukraine conflict.

The government will also offer a discount of 0.25 levs per liter of gasoline, diesel, and liquefied petroleum gas and methane from July until the end of the year and scrap excise duties on natural gas, electricity, and methane.

Denmark

In June, Danish lawmakers agreed a cash handout to the elderly and other measures totaling 3.1 billion Danish crowns ($439 million) to cushion the impact of soaring inflation and high energy prices. The measures also include a cut to a levy on power prices.

Danish lawmakers have previously agreed a so-called “heat check,” which means subsidies worth 2 billion Danish crowns ($288 million) will be paid to some 419,000 of the households hard hit by rising energy bills.

European Commission

European Union countries are largely responsible for their national energy policies, and EU rules allow them to take emergency measures to protect consumers from higher costs.

The European Union in July asked its member states to reduce gas demand voluntarily by 15% this winter with the possible introduction of mandatory cuts.

The bloc also aims to refill storage to 80% of capacity by November 1 to provide a buffer for peak demand winter months.

France

France has committed to capping an increase on regulated electricity costs at 4%. To help do this, the government has ordered utility EDF, which is 80% state owned, to sell more cheap nuclear power to rivals.

New measures announced since the Ukraine crisis – such as helping companies with the cost of higher gas and power bills – bring the total cost of the government package to 25 billion to 26 billion euros ($27 billion), Finance Minister Bruno Le Maire said.

French energy regulator CRE said last month it was proposing a 3.89% increase in regulated electricity sales tariffs (TRVE). The government has the ability to oppose the regulator’s proposed rate hike and set new tariffs at a lower level or reject them outright.

Germany

German workers and families will receive extra cash, cheaper gasoline, and cut-price public transport tickets to help them shoulder soaring power and heating costs.

Workers who pay income tax will receive a one-off energy price allowance of 300 euros as a supplement to their salaries. In addition, families will receive a one-time bonus of 100 euros per child, which doubles for low-income families.

Over the next few years, some 12 billion to 13 billion euros per year will be allocated to subsidize renovations to old buildings and installing more energy-efficient windows, doors, and heaters.

However, German households will have to pay almost 500 euros ($510) more a year for gas after a levy was set to help utilities cover the cost of replacing Russian supplies.

The levy, introduced by Germany in a bid to help Uniper and other importers cope with soaring prices, will be imposed from October 1 and remain in place until April 2024.

Greece

Greece has spent about 7 billion euros in power subsidies and other measures since September to help households, businesses, and farmers pay their electricity and gas bills.

Subsidies, which will be incorporated into power bills, will come in at about 1.136 billion euros in August and absorb up to 90% of the rise in monthly power bills for households and 80% of the rise for small and medium-sized firms.

Greece has imposed a cap on payments to power producers to reflect their real production costs, effectively scrapping a surcharge on electricity bills, with proceeds earmarked to help it finance power subsidies.

Hungary

Hungary has capped retail fuel prices at 480 forints ($1.23) per liter since last November, well below current market prices, to shield households from surging fuel prices. The measure however led to such an increase in demand, which subsequently forced the government to curb eligibility for the scheme.

The sharp rises in European gas and electricity prices have also forced Hungary’s government to curtail a years-long cap on retail utility bills, setting the limit of capped prices at national average consumption levels, with market prices applying above that.

Hungary has also imposed an export ban on fuels to ensure domestic supply needs and recently loosened logging regulations to meet increased demand for solid fuels, such as firewood.

Italy

Italy approved in early August a new aid package worth around 17 billion euros to help shield firms and families from surging energy costs and rising consumer prices.

The scheme, one of the last major acts by outgoing Prime Minister Mario Draghi before a national election next month, comes on top of some 35 billion euros budgeted since January to soften the impact of sky-high electricity, gas, and gasoline costs.

A draft seen by Reuters showed the government would extend a 200-euro bonus paid in July to low and middle-income Italians who did not previously receive it.

A cut in excise duties on fuel at the pump scheduled to expire on August 21 is set to be extended to September 20.

Italy is also promoting a cap on gas prices at a European level to help contain price spikes.

Netherlands

The Netherlands has cut energy taxes for its 8 million households.

Norway

Norway has been subsidizing household electricity bills since December and currently covers 80% of the portion of power bills above a certain rate. This is planned to go up to 90% from September, with the scheme to remain in place until at least March 2023.

Poland

Poland has announced tax cuts on energy, gasoline, and basic food items, as well as cash handouts for households. It has also extended regulated gas prices for households and institutions like schools and hospitals until 2027. The government agreed in July on a one-off payment of 3,000 zlotys to households to help them cover the rising cost of coal. Prime Minister Mateusz Morawiecki has said the total cost of curbing energy prices in Poland will amount to around 50 billion zlotys.

Romania

Romania’s coalition government has implemented a scheme capping gas and electricity bills for households and other users up to certain monthly consumption levels and compensating energy suppliers for the difference. The scheme is supposed to be in place until end-March 2023.

Romanian Prime Minister Nicolae Ciuca has estimated in February the support scheme will cost around 14.5 billion lei ($3.27 billion), but analysts now expect it to exceed 10 billion euros.

The leftist Social Democrats, parliament’s biggest party and a part of the governing coalition, supports replacing the cap-and-subsidy scheme with regulated prices.

Spain

Spain has started to temporarily subsidize fossil fuel plants’ power costs in a bid to bring down high prices in the short term while keeping a longer-term focus on building renewable capacity. The system is due to be in place until May 31, 2023.

Spain also cut several taxes to reduce consumer bills.

Spain announced 16 billion euros in direct aid and soft loans to help companies and households weather sky-high energy prices.

Sweden

Sweden will compensate households worst hit by the surge in electricity prices, with the government setting aside 6 billion Swedish crowns ($605 million) for the measures.

– Rappler.com

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