Germany Defends Surcharge Exemptions

Source: By MELISSA EDDY, New York Times • Posted: Thursday, December 19, 2013

BERLIN — Chancellor Angela Merkel of Germany vowed Wednesday to fight a European Union investigation into her government’s policy of exempting hundreds of companies from a surcharge on electricity that is used to promote renewable resources.

Ms. Merkel insisted that promoting solar and wind energy was crucial to German competitiveness, but she also noted that other issues were at stake.

“This is about companies, and when it’s about companies, it’s about jobs,” she told lawmakers Wednesday, shortly before European Union officials announced the investigation.

The transformation of the German energy sector from a reliance on power from traditional sources, particularly nuclear and coal, to electricity generated largely by renewable sources was a signature policy of Ms. Merkel’s previous term as chancellor. Her new government has made making changes to the surcharge system a priority.

While the European Union said it could envision cases in which offering discounts for leading industries could be justified, it expressed concern that the practice might constitute government assistance, which requires approval from Brussels. The investigation could take up to three years.

Industrial users are already wary of a lack of price stability in Germany’s energy market, and their representatives warned that scrapping the exemption could spell doom for many companies.

“A loss of the exemption for energy-intensive companies would mean the end for many of them, and cost thousands of jobs,” said Ulrich Grillo, president of the Federation for German Industry.

Companies in Germany still pay substantially more for electricity than their counterparts other European Union countries, a point the chancellor was quick to make. “As long as there are countries in Europe where electricity is cheaper for industry than it is in Germany, I cannot see how we are distorting competition,” Ms. Merkel said.