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November 28, 2024
The Federal Constitutional Court has confirmed the legality of the electricity price brake introduced during the energy crisis. The Karlsruhe judges on Thursday rejected the constitutional complaints of 22 operators of green electricity plants. They had objected to the skimming of a portion of their profits to finance the measure.
The electricity price brake was introduced by the Federal Government at the end of 2022 in response to exploding energy prices following Russia's war of aggression against Ukraine. The aim was to relieve households and businesses by offering a portion of electricity consumption at a fixed, lower price. For private households, this capped price was 40 cents per kilowatt hour for 80 percent of the previous year's consumption, for companies 13 cents for 70 percent.
The electricity price brake was financed, among other things, by skimming so-called excess profits from electricity producers. These surpluses arose due to the pricing mechanism on the electricity market (merit-order principle), in which the electricity price is based on the marginal costs of the most expensive power plants needed to meet demand. As gas prices rose exorbitantly during the energy crisis and gas-fired power plants were often the most expensive on the market, other types of generation such as wind, solar, and biomass plants also benefited from the high prices, even though their production costs remained largely constant. The resulting revenues, which exceeded usual profit expectations, were partially skimmed from December 1, 2022, to June 30, 2023.
The plaintiff operators of green electricity plants argued that skimming their profits was unconstitutional. They saw coping with the energy crisis as a state task that should be financed from tax revenues. The plaintiffs also emphasized that it was not renewable energies but gas-fired power plants that were the cause of the high electricity prices. Ironically, these were exempt from the skimming.
The Federal Government defended the measure as a response to an exceptional situation. The skimming was a necessary contribution by electricity producers to stabilize the electricity market. The intervention was also limited in time and thus kept as minimal as possible.
The Federal Constitutional Court confirmed the legality of the electricity price brake and the associated excess profit skimming. The judges argued that in the exceptional situation of the energy crisis, a reasonable balance had to be struck between the beneficiary electricity consumers and the producers with above-average profits. The time limit of the skimming and the orientation towards the cost structures of the various types of generation were assessed as proportionate. The plaintiffs failed with their argument that the financing of the electricity price brake should be solely from tax revenues.
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