Austrian Government has Agreed on Electricity Price Brake

PeopleOther ♦ Published: September 7, 2022; 22:36 ♦ (Vindobona)

The Austrian federal government has agreed on the long-discussed "electricity price brake" to cushion the high cost of energy. According to information from the federal government, each household will pay a lower electricity price for that share of electricity consumption which corresponds to 80 percent of the average consumption of an Austrian household in the previous year.

Chancellor Karl Nehammer (middle right), Vice-Chancellor Werner Kogler (middle left), l Minister Leonore Gewessler (right), and Minister Magnus Brunner (left) announced the electricity price brake. / Picture: © Bundeskanzleramt (BKA) / Christoper Dunker

"No one in Austria should not be able to afford their basic electricity needs. This is the most important goal of the electricity price brake that we adopted in today's Council of Ministers. With this, we are implementing another aid measure against inflation," said Chancellor Karl Nehammer following the meeting of the Council of Ministers.

The government showed unity today to present the new measures against inflation and how to try to fight the energy crisis in Austria. In the press foyer, together with Vice Chancellor Werner Kogler, Energy Minister Leonore Gewessler and Finance Minister Magnus Brunner, he provided information on the implementation of an electricity cost brake in Austria, which is expected to be effective from December this year until June 2024.

Negotiations between the Ministry of Energy and the Ministry of Finance were successfully concluded. Accordingly, the government assumes that the aforementioned 80 percent of the average consumption of Austrian households is to be set at around 2,900-kilowatt hours (kWh). Up to this mark, only ten cents per kilowatt hour are to be charged - only for consumption above this level is the standard market price to be paid. The ten cents per kilowatt hour refers to the labor or consumption price.

"This model is designed to help people better cope with electricity price increases. At the same time, the model is designed so that everything above 2,900-kilowatt hours is subject to the normal electricity tariff. This is to provide an incentive to save, to continue to be careful not to consume too much electricity," informed the Chancellor.

The chancellor thanked WIFO head Gabriel Felbermayr and his team for the "very intensive and trusting" exchange. According to Nehammer, together with the energy and finance ministries, they had found a way "that is viable, that is also viable in budgetary terms, and that above all can be implemented quickly and unbureaucratically." "Now, in the phase of stress, the help must reach the people quickly, " according to Nehammer.

Given criticisms voiced, Nehammer explained that "for us, it was a question of weighing things up" and that ultimately "fast help" was prioritized, because "if you help quickly, you help twice." In addition, he said, differentiations had been made: "People in particularly difficult social situations who are exempt from the broadcasting fee will receive additional support." Further, it is to give for households, in which more than 3 persons live, by request the possibility of an additionally promoted quota.

Nehammer also pointed to the relief measures already in place to help people in the face of general inflation: "Since August, the relief steps have started to take effect, be it the double family allowance or the anti-inflation and climate bonus. All in all, we now have a plethora of measures to ensure that we do not leave the people of Austria on their own in this phase of strain." The Chancellor concluded by thanking everyone who had worked hard to implement the measures: "Together, we have succeeded in taking an important step toward relieving the burden on people."

"In times of this inflationary trend, there are peak outliers that are harmful overall: socially, economically and for business enterprises. On the one hand, there is direct aid, on the other hand, it is important to curb costs," Vice Chancellor Werner Kogler emphasized. This is so important, he said, because people's everyday lives are about basic needs. For everything you need in the household, he said, you should have this favored basic tariff, which is based on the prices before the crisis. "We have essentially done what was recommended in terms of the basic rates. The direct aid packages make up a large sum and are now starting to take effect. This is very important for those at the bottom of the income pyramid," said the vice-chancellor, who pointed to the social differentiation in the system. The electricity price brake comes quickly and in time because of the beginning price increases on the part of the suppliers. "Saved electricity is also a contribution to securing jobs in our export-oriented industry."

In her statement, Energy Minister Leonore Gewessler maintained that it was important for the federal government to take measures to counteract the massive wave of inflation and provide relief for people. "The electricity cost brake does just that. We have created a workable model that puts the brakes on the increased costs in the electricity sector. This is significant relief without the need for an application," Gewessler explained. He added that the relief works directly on the electricity bill, supports basic electricity needs and reaches people very quickly. People who need assistance beyond that will receive an additional 75 percent discount on grid costs.

Since only basic needs are covered, the program also ensures that energy continues to be used carefully, because: "Energy is a precious commodity and every contribution to saving energy helps," says Gewessler. Especially when it comes to saving electricity, "little things often make all the difference," he said, whether it's defrosting the refrigerator, using LED lamps or not letting the washing machine run half empty. "Especially now we have to pull together," said the energy minister, who thanked all those involved for bringing about the decision.

"Times are extremely challenging. We have been struggling as a federal government for half a year with very complex problems for which there are no simple solutions," said Finance Minister Magnus Brunner. The high costs would burden all people in the country, the inflation had meanwhile also reached the middle class.

However, a great many measures had been launched: "There is no population group that we have not supported accordingly with a relief step, and the measures are arriving." Next year, structural measures such as the valorization of social benefits would also take effect. "Both in terms of speed and volume, we are at the forefront throughout Europe," Brunner expressed his confidence. However, as the price of electricity continues to rise, he said, the federal government must put the brakes on it, adding that emphasis was also placed on integrating a social scale. "Overall, the costs amount to 3 to 4 billion euros," the Finance Minister said, adding that this also depends on the contract situation and the development of market prices.

Only time will tell whether the measures against inflation will help and how much resilience is needed.

Federal Chancellery of Austria