Germany Approves Energy Law Critics Say Will Raise Power Prices

(Bloomberg) -- German lawmakers approved legislation to boost investment in the nation’s power and natural gas grids, a move that could raise electricity bills for consumers during the transition to a greener economy.

The measure, part of a package of energy laws passed Friday, gives the regulator known as BNetzA more authority to increase the rate of return for companies that invest in grid upgrades. But those costs will ultimately have to be recovered from customers.

“While this may hike customer bills, it seems necessary to account for the significant rise in the cost of capital and debt over the past two years,” said Bloomberg Intelligence analyst Patricio Alvarez. Granting the regulator more independence could increase investment in the network, he added. 

Grid upgrades are a central component of Germany’s embrace of renewable energy and its effort to meet climate goals. Europe’s largest economy wants to reach 80% green power production by the end of the decade, requiring massive spending on network infrastructure. The nation already faces some of Europe’s highest power costs after last year’s energy crisis.  

BNetzA earlier this year pledged to increase investor returns by 40% as it seeks to attract capital needed for the energy transition. Some grid operators have argued that this is still not enough. The regulator has said it will take a balanced approach as it considers next steps.

“In the coming year, we will discuss fundamental issues in great detail with the industry in order to get an idea of whether the ramp-up of the energy transition is properly mapped in regulatory terms,” an agency spokesman said in a statement.

Giving BnetzA more leeway in setting prices has drawn criticism. Consumer group VZBV has argued that it will result in high costs for grid users, adding that network operators in the past have already made significant returns. Some politicians are also wary about the agency’s powers.

“You are creating a new super-authority here, which is then only insufficiently democratically controlled,” said Andreas Lenz, a lawmaker from the oppositional conservative coalition. 

Industry group BDEW, which represents energy and water utilities, urged the authority to act transparently, saying that “it is important to reorganize the checks and balances” in grid investment during the green transition.

The energy package passed on Friday also contains provisions to integrate more renewable power into the network and encourage greater use of hydrogen. 

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