Germany set to cut industry power bills

By Chris Bryant in Berlin and Nikki Tait in Brussels
Published: May 25 2009 18:43

Berlin is preparing to help domestic industries overcome the economic crisis by cutting the electricity bills of the country’s largest energy users.
Aluminium, copper and zinc producers are among energy-intensive industrial sectors that could benefit from the plans, which are set to be agreed ahead of elections in September.

Ministers have argued for months about how best to aid domestic industries and the chancellery has also intervened in the discussions, industry sources have told the Financial Times.
Any subsidies will be examined closely by competition authorities in Brussels and could prompt renewed criticism that Berlin is undermining European Union climate legislation.
The environment and economic ministries confirmed that talks were taking place but declined to reveal details of the plans because they were still being finalised.
In a further sign of Berlin’s readiness to tackle high energy costs, leaders of the ruling coalition agreed on Monday to modify tax breaks on agricultural diesel, potentially saving struggling farmers more than €500m ($700m, £440m) over the next two years.
Officials insist that German industry pays much more for its electricity than rivals in France or Spain, putting it at a competitive disadvantage that could force companies to shut down or shift production overseas.
Joachim Pfeiffer, energy policy co-ordinator for the Christian Democratic Union of Angela Merkel, chancellor, told the FT that some companies were “fighting for their survival”.
“We are working on a package at full speed that we want to pass before the federal election,” he said. “It is in the German people’s interest that we preserve Germany’s industrial base and core competencies during the crisis.”
The bulk of any relief is likely to be found by reimbursing companies for the cost of carbon dioxide emissions trading certificates that utilities currently price into their electricity bills.
Germany successfully argued at an EU summit in December that energy-intensive industries should be not be forced to buy emission permits between 2013 and 2020 because companies would otherwise shift production overseas.
Berlin now wants to go further by compensating energy-intensive companies in the intervening years.
Officials are also considering whether to reward big power consumers for their role in balancing the electricity network during peak-load periods.
But Claudia Kemfert, head of energy policy at the German Institute of Economic Research (DIW Berlin), said it was “not the government’s job to subsidise the profits of energy companies”.
She urged utilities to pass on to consumers the benefit of a recession-induced drop in electricity prices and emission certificate costs.
European Commission antitrust officials said they had not yet been contacted by German authorities, so could not comment.
Additional reporting by Joshua Chaffin
Copyright The Financial Times Limited 2009