The next wave of costs is rolling towards German gas customers

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    The Kremlin’s sanctions against Gazprom Germania and its subsidiaries could burden German taxpayers and gas consumers with additional costs of around five billion euros a year. Because gas urgently needs to be procured as an alternative, there are now additional costs. Some of these are to be passed on to the energy suppliers and thus the end customers from October in the form of a gas levy.

    Corresponding information from WELT AM SONNTAG was confirmed by several industry representatives. The Federal Ministry of Economics and Climate Protection did not want to comment on the specific amount of the costs caused by Moscow’s counter-sanctions.

    The Kremlin stopped supplying Gazprom Germania with a decree dated May 11. The Russian embargo is seen as a retaliatory action because the federal government had previously put the German subsidiary of the Russian energy giant Gazprom under trusteeship. As a result of the delivery stop, Gazprom Germania now has to buy replacement quantities on the wholesale market at high cost in order to be able to continue to service the supply contracts with German municipal utilities and regional suppliers.

    According to earlier information from Economics Minister Robert Habeck (Greens), it is about a delivery failure of around ten million cubic meters per day: “These quantities can be procured elsewhere on the market, and it is the task of the hour to get the quotas again.”

    The Gazprom counter-sanctions make it clear what extensive gas supply disruptions could mean. First of all, there is a heavy burden on the federal budget because Gazprom Germania has to use state money to buy gas at high prices. In addition, gas storage tanks have to be filled at high cost, and the time until next winter is running out.

    The federal budget will be burdened with billions, as can be seen from the price development on the European gas trading platform TTF. According to this, the Federal Network Agency, as trustee of Gazprom Germania, has had to pay an average of around 85 euros per megawatt hour of natural gas since mid-May. Before the war, prices of 20 to 30 euros were common.

    With ten million cubic meters a day – which corresponds to an energy volume of between 105,000 and 115,000 megawatt hours, depending on the gas quality – costs of up to 9.7 million euros per day have been incurred so far. If this wholesale price stays the same, the burden on the federal budget will add up to around 3.5 billion euros a year. Since it is estimated that a maximum of one third of the procurement costs can be recouped through resale to utility companies, the burden for taxpayers is well over two billion euros per year.

    However, the costs could also rise further: gas prices recently exceeded the 100 euro per megawatt threshold. Should this level be the new average, the trustee could also face procurement costs of more than eleven million euros per day. That would be more than four billion euros per year.

    For energy security in the coming winter, there is probably no alternative to the procedure. Nevertheless, it is politically sensitive. Because the German trust administration via Gazprom Germania does not change the ownership structure. The German gas company based in Berlin is still a subsidiary of Gazprom Export of the Russian gas supplier Gazprom. So German taxpayers support Russian energy companies with billions.

    Further costs in the three-digit million range are incurred because Trading Hub Europe (THE), a German pipeline operator company, is required by law to offer financial incentives to energy suppliers in order to encourage them to fill the other storage facilities early. A first tender for these “Strategic Storage-Based Options” ended at the end of May with a total cost of 370 million euros. Further financial incentives to “ensure security of supply” have already been advertised.

    Even higher costs arise from filling the natural gas storage facility in Rehden in Lower Saxony. Habeck ordered the storage there last Wednesday by ministerial decree. By far the largest German gas storage facility is still owned by the Gazprom subsidiary Astora. But because they don’t store anything there, the Federal Network Agency used its new legal options and terminated the storage contract with the Russians. Instead, THE is now to fill the storage facility on behalf of the federal government. A fill level of 80 percent by October 1 is required by law. The procurement of the 3.1 billion cubic meters of gas required for this costs around 2.5 billion euros at the current market price.

    It doesn’t stop there: by November 1, the law even prescribes a filling level of 90 percent. This amount is considered essential to get through the winter without major restrictions in the event of a Russian gas embargo. So more gas has to be bought. But there is no time to wait for gas prices to fall. Since the pore storage facility can technically only be filled very slowly, storage in Rehden has to start almost immediately.

    According to the Gas Storage Act, the gas buyer THE can pass on the costs to the so-called balancing group managers, i.e. regional suppliers and municipal utilities, from October. It can be taken for granted that these suppliers will add the new gas surcharge to the end user’s bill. THE will “determine, publish and settle a new allocation”, the company confirmed when asked. The surcharge is expected to be set for the first time in October 2022 and published six weeks beforehand, in August.

    Depending on the extent, the gas levy for private consumers could be low because it will be shared by many people. But either way, it would be more expensive, and at least visually it doesn’t fit in with the government’s promise not to let the burden of energy costs get out of hand. Finally, there is also the steadily increasing CO2 tax on gas consumption.

    Perhaps that’s why the Ministry of Economic Affairs is so taciturn when it comes to the additional costs caused by the Russian counter-sanctions. “The procurement prices are trade and business secrets of Gazprom Germania, about which we cannot provide any information,” said a spokeswoman for Habeck WELT AM SONNTAG. So far, however, no money has flowed, emphasizes the Ministry of Economic Affairs: “The federal government is currently not providing any funds,” says Habeck’s spokeswoman.

    However, the word “present” is likely to be the key term here. After all, should the German Gazprom subsidiaries make a profit under the trusteeship of the federal government, the money will not flow to Moscow: “For the current financial year, the Federal Network Agency has ensured that profits remain in the company.”

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