The first two sentences of the draft act amending the energy price brakes published on 5 April 2023 already indicate that this is unlikely to be the last amendment to the Gas and Heat Price Brake Act (Erdgas-Wärme-Preisbremsengesetz, EWPBG) and the Electricity Price Brake Act (Strompreisbremsegesetz, StromPBG). It describes the price brakes as having been "drafted and put into effect in the last quarter of 2022 within a very short time." In light of initial experience gained with the acts' implementation, "various adjustment requirements, mainly of a technical and editorial nature, have been identified".
Whether this already conceals a justification of future amendments remains to be see. Beforehand, an amendment act had already been passed which, among other things, enabled private companies to be entrusted with the tasks assigned to the audit authority in connection with the price brakes and extended individual deadlines. Such extensions had become necessary, among other things, because notifications had to be made to the audit authority and this authority had still not yet been determined by the beginning of April 2023. The German Federal Ministry for Economic Affairs and Climate Action [Bundesministerium für Wirtschaft und Klimaschutz, BMWK] has issued a call for tenders for performance of the audit authority's tasks with a deadline for the submission of bids of 10 April 2023.
The implementation of the acts has indeed turned out to be awkward and often less than satisfactory. This is also evident from the "implementation aids" provided by the BMWK: In addition to two telephone hotlines and an e-mail address, four FAQ documents have been published; these are updated on a constant basis and, by the end of March 2023, already totalled no less than 65 pages. It is therefore high time for a harmonising amendment act. The now published "Draft Act to amend the Gas and Heat Price Brake Act, to amend the Electricity Price Brake Act and to amend further energy and social legislation" is to pass through the Bundestag and Bundesrat before the summer break (last session week 3 - 7 July 2023), as the act's entry into force otherwise cannot be expected until October 2023. Given the current limited time period of the price brakes of 31 December 2023, this is extremely late.
Do companies need to prepare for new obligations or changed deadlines?
The draft has not changed the basic mechanism of the price brakes. In particular, the complex design of the maximum thresholds for relief as well as notification and evidence requirements arising from the European Temporary Crisis Framework (TCF) are fundamentally not being changed. In contrast, deadlines were already extended with the previous amendment act:
- With regard to the job retention obligation (Sec. 37 (2) sentences 1 and 2 StromPBG/Sec. 29 (2) sentences 1 and 2 EWPBG), the deadlines for providing evidence of a shop agreement or the absence of such an agreement were extended from 15 July 2023 to 31 July 2023.
- With regard to the ban on bonuses and dividends, the deadlines for informal declarations of non-utilisation of a relief amount exceeding EUR 25 million were extended from 31 March 2023 to 31 July 2023, Sec. 37a (6) StromPBG/Sec. 29a (6) EWPBG.
The draft amendment of 5 April 2023 also extends the notification period for companies that operate CHP plants pursuant to Sec. 2 nos. 13, 14 of the German Combined Heat and Power Act [Kraft-Wärme-Kopplungsgesetz, KWKG]. Now, such companies are not required to inform their energy supplier of the quantities of pipeline-bound natural gas consumed by the CHP plant for electricity generation purposes until 31 May 2023 (Sec. 10 (4) EWPBG).
What are the main changes in the draft?
Now that private companies can be commissioned to perform the tasks of the audit authority, the audit authority may also specify the form in which notifications are to be made to it. Additionally, the draft enables the BMWK, in agreement with the German Federal Ministry of Finance [Bundesministerium für Finanzen, BMF], to issue a legal ordinance designating an authority that is to perform some or all of the tasks of the audit authority. The extent of a possible "co-existence" of a private audit authority and an official authority will presumably also be regulated in this ordinance.
Furthermore, the act creates a similar power to issue an ordinance designating a federal authority that is to prosecute the regulatory offences that should actually be prosecuted by the audit authority. This concerns the notification obligation to make self-declarations, which is subject to a fine, and which must be submitted as of next year 2024 (Sec. 43 (4) no. 3 StromPBG/Sec. 38 (4) EWPBG). This power had been excluded from the possibility of commissioning a private company to handle the tasks of the audit authority. Finally, the act also includes the possibility of issuing an ordinance to specify the procedure for possible reclamations of relief by the audit authority (so-called claw-back mechanism, see below).
Ban on bonuses and dividends
The existing ban on bonuses and dividends (Sec. 37a StromPBG/Sec. 29a EWPBG) as of a relief amount of EUR 25 million has been concretised to the effect that this limit for relief amounts (price brakes and further state aid during the energy crisis) applies to the entire group of companies, including the parent company. From the wording of the provision applicable to date, this limit referred only to the individual company. Accordingly, significantly more companies will soon have to decide whether to forego bonuses and dividends or to forgo relief under the price brake laws due to their group affiliation.
In addition, the act clarifies that this only covers bonuses and other recognised remuneration actually substantiated for the calendar year 2023. The distribution of bonuses for 2022 may therefore be made this year, which was doubtful under the previous regulation. Furthermore, a differentiation is now being made between a relief amount of EUR 25 million and EUR 50 million: While it is still possible to disburse bonuses and dividends for the year 2023 with a relief amount between these thresholds if they were agreed before 1 December 2022, this privilege no longer applies from a relief amount of EUR 50 million upwards.
Due to this differentiation, the act also creates an additional opt-out provision for companies by virtue of which they can obtain relief in excess of EUR 25 million under the price brakes and other state aid during the energy crisis, but not in excess of EUR 50 million, and where consequently only the requirements for the lower threshold apply. The opt-out possibility had previously only been for a total cap on the relief amount as of EUR 25 million, entirely avoiding the bonus and dividend ban.
So-called claw-back mechanism
The StromPBG and the EWPBG have so far not provided for detailed regulations in the event that companies (whether intentionally or not) draw relief in excess of their maximum limits. The draft amendment of 5 April 2023 now contains specific requirements in this regard, which can be specified further by the possibility of a corresponding ordinance (as already mentioned above).
First of all, if there are concrete indications to the effect that maximum limits have been exceeded, energy providers or suppliers are required to notify the audit authority immediately. The audit authority, in turn, "should" initiate the procedure for determining the maximum limits in case of concrete indications, which has thus far only been initiated at the request of a company. This procedure according to Sec. 11 StromPBG/Sec. 19 EWPBG is necessary for companies or groups of companies that wish to obtain relief in excess of EUR 4 million. However, due to the complicated design of the price brakes - in particular the maximum limits - and the fact that companies are initially responsible for preparing their own self-declarations, it is possible that excessive relief is obtained. In this case, the audit authority - also in the form of a company under private law - "can" oblige the respective company and its affiliated companies by administrative act to disburse the excess relief amount to the audit authority.
If the maximum limit in the self-declaration submitted deviates from the maximum limit determined by the procedure pursuant to Sec. 11 StromPBG/Sec. 19 EWPBG, the self-declaration must be corrected within one month of the issue of a corresponding administrative act. Without this correction, no further relief will be paid. The energy provider or supplier is also granted the right and obligation to reclaim excessive relief, insofar as the reimbursement claim has not yet been transferred to the audit authority. When this is to take place will be regulated in another ordinance. Objections and actions to challenge administrative acts through the claw-back mechanism do not have a suspensive effect and can therefore be enforced immediately by the audit authority.
Relief for atypical under-consumption
An entirely new relief scheme is being created for businesses that were affected by state corona measures or by the flood disaster in 2021. As 2021 is the reference year for calculating the relief quota, this may lead to strong distortions and hardship cases that jeopardise a company's existence. The additional amount is made up of the original relief sum, a compensation factor and an adjustment factor. An application must be made to the audit authority. The company must have consumed at least 50 percent less energy in a comparison between 2021 and 2019; it must have received corona bridging aid or funds from the "2021 reconstruction aid" fund; and it must additionally receive more than EUR 10,000 (in the case of gas or thermal heating) or EUR 1,000 (de minimis limit) as a result of the new relief regulation.
However, only companies whose relief sum (also based on the group of companies, if any) does not exceed EUR 2 million can benefit from this privilege. The application for reimbursement of an additional relief sum may be submitted to the audit authority from 1 September 2023 until the end of 30 September 2023, which will also determine the eligibility and amount as well as arranging for its disbursement by the federal treasury.
Preliminary determination of surplus revenues
Furthermore, a new provision has been added by virtue of which the operator of an electricity generation plant may initially provisionally notify the transmission system operator of the values for determining the surplus revenue and disgorgement amount pursuant to Sec. 29 (1) StromPBG if these have not yet been determined or have not been finally determined by the expiry of the respective deadline for the notification (the first deadline runs until 31 July 2023).
The preliminary notification must be based on existing data to the extent possible. If no detailed indications are available, the values are to be estimated. Insofar as only individual entries are made on a provisional basis, the transmission system operator is to be informed of which of the entries are provisional. Once the values have been finally established, they likewise have to be communicated to the operator without delay. If the final determination of the values gives rise to a difference in the surplus revenue, the access network operator must be notified immediately. Any such surplus is then also balanced out between the operator of the power generation plant and the access network operator.
Examples of further amendments
The draft contains various additional provisions, for example
- the entitlement to relief also for gas exit points with an annual consumption of more than 1.5 million kWh which are balanced via standard load profile (Sec. 6 (1) sentence 1 no. 1 EWPBG-E),
- an adjustment of the reference price for heating electricity and the operation of heat pumps (28 ct instead of 40 ct per kWh, Sec. 5 (3) StromPBG-E),
- a clarifying regulation on the annual consumption forecast in case of the installation of a heat pump or a charging device for electric vehicles (Sec. 6 sentence 3 StromPBG-E),
- a clarifying regulation on the maximum limits for rail operators (Sec. 10 StromPBG-E),
- price brake-related amendments to the German Hospital Financing Act [Krankenhausfinanzierungsgesetz, KHG] and the German Social Code Book XI [Sozialgesetzbuch XI, SGB XI].
Many questions are still open
We will doubtlessly also have to rely on the above-mentioned implementation aids of the BMWK in the future. The draft amendment of 5 April 2023 leaves many questions concerning the practical implementation of the energy price brakes unanswered. This is especially the case for self-declarations, the correct determination of maximum limits, how transferred relief is to be passed on in case of rents and leases, and the determination of surplus revenue and scope of eligible hedging transactions. It is also unsatisfactory that many of the points requiring clarified have been shifted to ordinances that have yet to be issued.
Even though the BMWK takes a stand - deviating from the legal requirements – in several points of its FAQ on how the energy price brakes should be implemented, this does not change the fact that the authority's standpoint has no legally binding effect and that a court dealing with the matter may come to a different conclusion. Companies will also have to continue dealing with this uncertain legal situation and find defensible and practically sensible solutions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.