Germany's network charge subsidies are not working as planned. Only some consumers are benefiting

Germany’s €6.5 billion government support scheme to reduce network charges is not meeting expectations. According to media reports, many customers will not see any reduction in their electricity bills at all. This has prompted criticism and concerns that competition between electricity suppliers could be distorted.

Germany introduced an extensive network charge subsidy programme aimed at reducing end-user electricity prices from the start of the year. These charges make up around a quarter of the final electricity price and have risen sharply in recent years. The German government therefore decided to cover part of network operators’ costs from the state budget, expecting suppliers to pass the reduction in network charges on to end-user electricity prices.

According to Handelsblatt, however, this assumption is only partly borne out. The key problem lies in the legislation, which requires suppliers to pass on the lower charges only when they next adjust the electricity price under a contract.

A survey of six major energy companies, including E.ON, EnBW and EWE, found that all of them plan to pass on the lower network charges to fixed-price tariffs only after their price guarantees expire. This means some customers may not benefit from the government support at all if their fixed-price contracts do not end until after 2026.

By contrast, new customers and those without fixed-price contracts benefit from lower prices immediately, creating disparities between consumer groups.

Distorting competition

The design of the system has also drawn criticism over its impact on the market. Smaller suppliers warn that the subsidy distorts competition in favour of large energy companies, which are more likely to offer fixed-price contracts.

Since information on how many customers have fixed prices is not publicly available, it is impossible to calculate precisely what proportion of households are effectively excluded from the support. Energy companies do not disclose these figures, citing commercial confidentiality.

Government faces criticism

The measure has prompted accusations that Economy Minister Katherina Reiche, a former head of the energy company Westenergie, designed it to benefit energy companies, Handelsblatt reported. Reiche had previously said she expected the support to be fully passed on to end-user electricity prices.

The government has already faced criticism for excluding households from electricity tax relief granted to industry, despite promising broader relief in the coalition agreement.