The federal cabinet decides to amend the act on energy security | News

Author: Andrea Thomas

BERLIN (Dow Jones) – Due to the tense gas supply situation, the federal government has approved legislative changes designed to protect failing energy companies in critical infrastructure from insolvency. In order to secure gas supplies and prevent chain reactions, it should therefore be possible for state participation and financial injections to energy companies, just like during the corona pandemic. In addition, new price correction mechanisms are planned so that gas importers can more easily pass the increase in purchase prices to their customers.

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Amendments to the law on energy security and the law on energy are to be adopted by the Bundestag and Bundesrat this week.

“The situation on the gas market is tense and, unfortunately, we cannot rule out its worsening. We must prepare for the situation to worsen. Therefore, we are tightening up our instruments again with the amendment to the act on energy security and the amendment to the act on energy security. Energy Industry Act, explained Federal Minister of Economy Robert Habeck (green). “It’s about doing everything possible to keep the basic supply in the coming winter and keep the energy markets as long as possible despite high prices and increasing risk.”

Financial injections may go to Uniper and Gazprom Germania

State financial injections could go to Uniper, for example. The gas importer has already confirmed that it is in talks with the federal government about billions of dollars of stabilization measures due to the additional costs of purchasing gas. During the crown pandemic, the federal government became involved in Lufthansa. The federal government could also take over shares in Gazprom Germania, which has been temporarily put in trust by the Federal Network Agency since April. The federal government should be allowed to own equity or silent partnership interests in critical infrastructure companies in the energy sector.

With the expansion of the toolkit, the federal government wants to be able to react quickly to escalating supply situations in an emergency. Maintenance work on the Nord Stream 1 gas pipeline, through which Russian gas flows to Germany, is scheduled for July 11. A few weeks ago, the volume of gas supplies was reduced by 60 percent to 40 percent of maximum capacity. If the inflow dries up completely and cannot be replaced with additional gas supplies via the Ukrainian gas pipeline or the purchase of liquefied gas, Germany faces a difficult autumn and winter period, when gas is scarce.

Easier transfer of higher gas prices

An amendment to paragraph 24 of the Energy Security Act is planned, so that higher gas prices can be passed on in contracts without a doubt. Before that, however, the Federal Network Agency must establish a significant reduction in the total volume of gas imports to Germany. In addition, there should be no automatism between the declaration of an alert or emergency by the Federal Network Agency in accordance with the gas contingency plan and the activation of the statutory price adjustment powers.

In addition, the act on energy security provides for a new paragraph 26, which, according to information from government circles, provides for the so-called the right to correct the net price. It is a mechanism thanks to which the additional costs of purchasing a substitute resulting from reduced gas imports can be shared equally among all gas consumers.

According to the ministry, the overarching goal of both alternative price adjustment laws is to maintain market mechanisms and supply chains as long as possible and to prevent cascading effects.

Stabilization activities in companies

In addition, section 29 of the Energy Security Act introduces temporary simplifications of the corporate law that make it easier for the federal government to carry out stabilization activities for companies from critical infrastructure in the energy sector. This facility is subject to strict conditions and should only be used in the event of a further increase in gas prices and deterioration of the situation. In doing so, these stabilization measures will have to be analyzed with priority over the pay-as-you-go payment method options in line with paragraph 26 and the net price adjustment method in line with paragraph 24.

“Stabilization measures for energy companies may help in the fact that there is no need to use price correction mechanisms,” says the Ministry of Economy. In addition, the tool box has once again been extended to include possible individual energy saving measures. According to the ministry, thanks to the new mandate to issue regulations, measures should also be possible before the crisis occurs and the federal load-sharing system is implemented, e.g. after the announcement of the gas early warning level. For example, energy saving measures can be regulated by a regulation.

Contact to the author: andrea.thomas@wsj.com

DJG / aat / apo

(END) Dow Jones Newswires

Jul 05 2022 07:20 ET (11:20 GMT)

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