The gas supply from Russia is now on the brink for Germany as well. Concerns about a possible total failure are growing every day – with dramatic consequences. How will the government counteract this?

In view of the worsening of the gas crisis in Germany, the federal government wants to prevent a price explosion for millions of customers. Federal Chancellor Olaf Scholz (SPD) promised state support measures for gas suppliers in need on Sunday.

Economics Minister Robert Habeck (Greens) warned of a possible “price explosion” at some municipal utilities at an event organized by “Zeit” on Saturday evening. No one knows whether Russia’s President Vladimir Putin is really stopping gas supplies to Germany. Against the background of the Russian attack on the Ukraine, we are dealing with “a quasi economic warfare conflict”.

Russia had already severely curtailed supplies through the Nord Stream 1 pipeline. This caused the gas importer Uniper to experience turbulence and called for state aid. The annual maintenance work on Nord Stream 1 will start in a few days. Normally, no gas will flow for ten days. The fear now is that this time Russia will not turn on the gas tap again.

Government is negotiating aid with Uniper

Scholz said in the ARD summer interview when asked whether gas suppliers or consumers should be helped: “I think it’s important to be active in both fields.” State loans to utilities are already helping “that prices have not yet broken through”.

With a view to the largest German gas importer Uniper, who got into trouble, Scholz said: “We are now examining with the company what can be done.” Scholz referred to Lufthansa, which had negotiated a rescue package worth nine billion euros with the government and the EU Commission in the Corona crisis. Discussions are now underway as to what is best to ensure that the gas supply does not suffer because an important company cannot continue its business.

Habeck said that some public utilities could experience a “price explosion”. This could happen if Russia no longer supplies gas via Nord Stream and the federal government allows large suppliers such as Uniper to pass on the prices to their customers such as municipal utilities. Companies that have imported a lot of Russian gas “have a real problem,” said Habeck. They would have to fulfill their supply contracts and buy much more expensive gas elsewhere.

The “sharp sword” of energy supply

Uniper plays a central role in energy supply and is also the largest operator of natural gas storage facilities in Germany. The government’s goal is to have gas storage tanks almost full by the start of the heating season in order to be prepared for the loss of supplies.

Habeck explained that passing on the prices outside of the contracts was already provided for in the Energy Security Act, which introduced the so-called car-free Sunday in the 1970s. However, the paragraph has not yet been activated – because this is “a very, very sharp sword”.

The sharp sword that Habeck is talking about is the previous paragraph 24 of the Energy Security Act. The existing law allows a “price adjustment right” for utilities. To do this, the Federal Network Agency must have formally determined a “considerable reduction in the total amount of gas imported into Germany”, which has not yet happened. If the mechanism is activated, suppliers could pass on their current additional costs to their customers within a short period of time. However, this could have very different consequences for customers, depending on which supplier they get gas from.

In order to distribute the burden more evenly, the federal government is working on a pay-as-you-go system for all gas customers. The departmental talks continued over the weekend, as the German Press Agency learned from government circles on Sunday. This means that the burden can be distributed “more evenly” across all consumers, according to a draft for an amendment to the Energy Security Act presented to dpa.

Endangered municipal utilities

The cities warned of a danger to security of supply in Germany. The general manager of the German Association of Cities, Helmut Dedy, told the German Press Agency that the federal and state governments must prevent municipal suppliers from getting into serious difficulties. It is mainly the municipal utilities, from which many households obtain gas and electricity, water or heat. The federal government must immediately put the municipal suppliers under the protective umbrella for companies.

The Association of Municipal Companies (VKU) warned of a chain reaction that could affect the municipal utility. In the “Rheinische Post”, managing director Ingbert Liebing called for instruments to curb the price spiral. Normally healthy municipal utilities would otherwise “at worst come to the brink of insolvency”.

When saving gas, Habeck initially continues to rely on voluntariness, as he said. If gas saving had to be prescribed, this also depended on the networks. It will then probably be regulated at the expense of those factories that are not part of a mixed network that also supplies protected private households.

Federal Network Agency warns of “deterioration of the situation”

The Federal Network Agency’s latest gas supply situation report (status: Friday) states: “The situation is tense and a deterioration in the situation cannot be ruled out.” The gas supply in Germany is stable at the moment. The current level of storage in Germany is around 61 percent. “Companies and private consumers have to adjust to significantly increasing gas prices.” It’s about saving gas.

According to the President of the Federal Network Agency, Klaus Müller, private households as well as hospitals and nursing homes would be given special protection in the event of a Russian gas supply stop. If industrial companies have to be separated from the gas supply, “we orient ourselves to the business damage, the economic damage, the social consequences and also the technical requirements of the gas network operation,” said Müller. Hamburg’s Senator for the Environment, Jens Kerstan (Greens), does not rule out limiting hot water for private households in the event of a gas emergency, as he made clear in the “Welt am Sonntag”.