DIW Proposals to Help Poor Germans Pay for Electricity

The anti-renewable propaganda machine is having a lot of fun pointing at the recent decision to increase the feed-in tariff surcharge for 2013. For example, James Conca at Forbes has a new post out titled “Anti-Nuclear Plan Cutting into German Families”. Thanks to this tweet by Rod Adams for the link.

In contrast, DIW (the leading German economic think tank) points out that this decision will lead to increasing the share of electricity in the average household budget from 2.4 percent in 2012 to 2.5 percent in 2013. No big deal.

Thanks to this tweet by Jochen Flasbarth for the link.

Except for households who are poor to begin with. As DIW explains, some of them might actually feel this increase. And they propose three countermeasures. See also the more detailed press release in German.

Their first idea is to increase welfare payments under the Hartz IV scheme by the amount necessary to compensate for the surcharge increase. They also helpfully calculate that amount:

It would by 1.70 euro per month.

The problem with this, however, is that only about half of poor households receive welfare payments in the first place.

Their second proposal would be to introduce an exception for the ecotax for the first 1,000 kWh consumed per year. Doing this would compensate for about 39% of the surcharge increase cost for the poorest households.

I think this is a very interesting idea. And it should be expanded to the surcharge.

Why should the surcharge be the same for all levels of consumption? We could have a low surcharge for the first 1,000 kWh and increasing levels with each step of 100 kWh more consumed.

That would, while helping distributing the burden better, also be an excellent incentive for everybody to save electricity.

Right now, industry has different levels of surcharges, though it works the other way round. The charges are lower with higher consumption, since these reductions want to protect the competitiveness of German industry.

With final consumers, shifting the burden would be for the entirely different reason of making sure that everybody has access to a basic amount of energy per year.

Actually, if so inclined, utilities could offer such a tariff tomorrow. There is no need for legislation. It’s a free market out there.

And that might actually make sense as a marketing tool. Sign up your customers when they are young with low income, and make them pay less surcharges for their lower consumption. Then, when their incomes and their electricity use goes up, ramp up the surcharges. Most of them will stay with their original utility just because of inertia.

The third countermeasure is helping poorer households reduce their electricity consumption by increasing efficiency. Explain how to do it, and maybe give some one-off subsidies to buy that new refrigerator that brings down electricity costs 50 euros a year.

I think these are interesting ideas. I hope they get a wide audience.


Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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