The House of Representatives has many doubts and questions about the electricity and gas price ceiling that will come into effect in January. But despite the support, there is little enthusiasm. It is not “the most brilliant scheme ever devised by the government,” acknowledged CDA member of parliament Henri Bontenbal. It’s also unclear how much the scheme will cost. “I see amounts of 23 billion euros coming in, which is more than two percent of our GDP,” says BNR in-house economist Han de Jong.
The House received the 89-page proposal just this week. The council of state is not called as usual. SP, PVV and independent member of parliament Omtzigt are the most critical of the plan which was born under heavy pressure. Omtzigt calls the price cap the ‘privatization of social security’.
Even the coalition is not reassured
But even supporters, as well as coalition parties including PvdA and GroenLinks, are not reassured by this “incredibly complex dossier”. They fear that companies will continue to make substantial excess profits. They are also concerned about the oversight and control of the regime. In this context, they argue for a greater role for ACM.
According to climate and energy minister Rob Jetten, energy suppliers “scrutinize the accounts” to prevent them from making excess profits. Profit margin is based on the last four years, so the worst year can be crossed out. This doesn’t sit well with all parties.
Those four years give a representative picture of profit, according to the minister. The fact that the worst year doesn’t count is because there have been years where there can be no question of smooth business operations, partly due to the coronavirus, war and Ukraine. The answers didn’t really satisfy PvdA and VVD.
Annual liquidation and block heating
There is a cut in the pattern, i.e. before and after the annual statement that a client receives. As a result, some people cannot take full advantage of the maximum price. According to Jetten, 95% of families will not be affected. However, a majority in the House wants the minister to see if anything can be done about it.
It also disturbs the Chamber that the regulation for blocking the connection is not yet in force. Jetten promises to send it to the House on Friday. This affects 700,000 households who share a gas, heating or electricity connection, such as flats or student houses. Their compensation will not arrive in January, but will be applied retroactively.
Unclear costs
The price ceiling will apply to gas consumption up to 1200 cubic meters and electricity consumption up to 2900 kWh. It will be a year ago and, according to current estimates, it will cost more than 11 billion euros. This can become so much more. The cabinet had previously said it could cost 23bn and possibly even 40bn. It will become clearer in the spring, Jetten promised. ‘If the price of gas remains high, it will cost the government a lot. And 23 billion euros represents more than two percent of Dutch gross domestic product, which is a costly intervention,’ says economist Han de Jong.
In the end, the House agrees with the grant scheme, which according to D66 is “far from ideal”. The VVD also thinks so. “It is an imperfect proposal”, concluded Silvio Erkens, deputy of the VVD. GroenLinks Member of Parliament Tom van der Lee calls it an “emergency link which is rather rude, but we’ll have to make do”.
“Extremely Complicated”
Han de Jong also calls the price cap an “extremely complicated regulation”. “But the energy companies apparently opt for this because otherwise they wouldn’t be able to register it administratively at all.”
The question is also whether consumers will notice the structural consequences of the price cap. Yes, thinks De Jong. ‘People who still have a long-term permanent contract with a low price won’t notice for now. But the price cap was set at 1.45 euros for gas and 0.40 euros for electricity, but current prices are about double that. Then you will notice.’
Purchasing power canyon
However, the opposition fears that when the cap is exhausted within a year, there will be a purchasing power cliff as consumers will have to pay full price again for gas and electricity. “Aside from a purchasing power gully being a nice term, it really depends on what the price of gas is going to do. If you look at the futures market, a drop in the price of gas is still high for now. And then there really is the possibility that purchasing power will fall even more sharply if there is no sequel. A new regime should therefore mainly target low incomes,” says De Jong.
Source: BNR
Fernando Dowling is an author and political journalist who writes for 24 News Globe. He has a deep understanding of the political landscape and a passion for analyzing the latest political trends and news.
