Cost of living: First Austrian state imposes cap on electricity prices

Lower Austria has announced a price limit on electricity costs for residents in the federal state – the first of its kind in Austria amid the rising cost of living.

Cost of living: First Austrian state imposes cap on electricity prices
Lower Austria is the first federal state in Austria to introduce an electricity price cap for households. Photo by Tayssir Kadamany on Pexels.

As of September, residents in Lower Austria will be able to apply for the Strompreisrabatt (electricity price discount) to receive a price cap 11 cents per kilowatt hour of power used.

The initiative, which was announced on Wednesday by Governor Johanna Mikl-Leitner (ÖVP), will cover 80 percent of an average household consumption and will cost €250 million, reports Kurier. The funding will run until 30th September 2023.

Mikl-Leitner said: “Our electricity price relief brings balanced support for all Lower Austrians and creates a clear incentive to save energy.”

READ MORE: Colder schools, fewer street lights: Austria prepares for a gas shortage

The subsidy will be deducted directly from the energy bill from October and the calculation will be based on the number of people living in a household.  

According to ORF, this means a one-person household will save around €170 per year, for two people it will be €272 and for three it will rise to €374.

A four-person household will save approximately €415 and for five people in a house it will be €457. For each additional occupant, savings should then amount to €41 per person.

However, the funding will only apply to residents who have their main home in Lower Austria, and not to second home owners. The cut-off date for registering a Hauptwohnsitz (primary residence) in the state was July 1st.

The model has been developed in cooperation with local energy supply EVN, but a deal is also being negotiated with other electricity suppliers in Lower Austria, according to Kurier.

The Lower Austria federal government is also calling for transparency on the possible impacts on individual industries in the event of an “energy control emergency”, as reported by Der Standard.

FOR MEMBERS: EXPLAINED: How Austria’s new finance measures could benefit you

Could a national energy price cap be introduced in Austria?

During the press conference on Wednesday, Mikl-Leitner, who has been actively campaigning for financial support for energy consumers, said: “I wholeheartedly welcome an Austria-wide price cap.” 

Inflation in Austria is currently running at 8.7 percent – the highest rate since 1975 – with increasing energy costs significantly contributing to the rising cost of living.

Gabriel Felbermayr, head of the Austrian Institute for Economics (WIFO), recently submitted a proposal to the Austrian Federal Government about capping energy prices for “normal consumption”. Chancellor Karl Nehammer has since directed Finance Minister Magnus Brunner to review the proposal, according to reports.

READ ALSO: Austria set to make TV and radio fees mandatory for everyone

The concept of a price cap has sparked debate in the country with the ruling Austrian People’s Party (ÖVP) reportedly against the concept. Both the Freedom Party of Austria (FPÖ) and the Social Democratic Party of Austria (SPÖ) have expressed support in subsidising energy prices.

With energy prices set to rise even higher and the prospect of Russia switching off the gas supply through the Nord Stream 1 pipeline, this issue is likely to remain a point of political debate for the foreseeable future in Austria.

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ENERGY CRISIS: Will Austria have enough gas for winter?

In recent months, there have been fears that Austria will not have enough gas for the winter season. The good news is that gas storage facilities are filling up, but by how much? Here's an update.

ENERGY CRISIS: Will Austria have enough gas for winter?

Since Russia invaded Ukraine in February and the EU imposed sanctions on the Kremlin, there have been concerns in Austria about the domestic energy supply.

The biggest worry is that Austria will not have enough gas for the coming heating season, which could quickly become a crisis when coupled with skyrocketing energy prices.

On Tuesday (August 16th), the European Aggregated Gas Storage Inventory confirmed that Austria’s gas storage capacity is now 60 percent full. This is already a significant improvement from early April, when reserves were just over 10 percent full.

Austria’s goal is to reach 80 percent capacity by November 1st in order to have a safety reserve. 

READ ALSO: Where are energy prices going up (again) in Austria?

But the Wiener Zeitung reports that there are questions over where the gas has come from as Gazprom has reduced deliveries to Austria’s OMV (the partially-state owned energy company) by two thirds.

Where is the gas coming from?

Christoph Dolna-Gruber, an energy advisor at the Austrian Energy Agency, said the origin of the gas “is not explicitly known”.

For example, from October 2022 to September 2023, OMV has secured additional natural gas supplies of 40 TWh from Norway and the Netherlands, reports the Wiener Zeitung.

The Austrian Federal Government has also secured 20 TWh of gas from two tenders, of which 8.5 TWh has been confirmed by the Ministry of the Environment to be from non-Russian sources.

However, the gas storage operators do not publish data on customers and contractual partners, so the origin is not in the public domain.

The extra 20 TWh of gas will be owned by the state but it is still unclear how it will be “handled” (e.g. for domestic use or for redistribution outside of Austria).

FOR MEMBERS: Why (and when) double-digit inflation is set to hit Austria

How much gas can Austria store?

The capacity of Austria’s gas storage facilities is 95.5 terawatt hours (TWh) or 8.6 billion cubic metres. The gas is stored underground in depleted natural gas reservoirs at a depth of between 500 and 2,300 metres.

Austria’s gas storage facilities are located in Haidach, Aigelsbrunn, Auerbach (the facility is known as 7-Fields), Puchkirchen, Haag, Tallesbrunn and Schönkirchen. All of the facilities are in Salzburg or Lower Austria.

OMV manages 26 percent (25.3 TWh) of Austria’s natural gas storage volume and the rest is divided between RAG, Uniper Energy and Astora.

The Haidach storage facility was previously managed by Gazprom and Astora, but the agreement with Gazprom came to an end earlier this month after Gazprom stopped making deliveries.

Since August 1st, Haidach has been managed by Astora and RAG. 

READ ALSO: Vienna forced to dim street lighting and cancel some Christmas illuminations

How much does Austria rely on Russian gas?

Prior to the war, Austria relied on Russia for 80 percent of its total gas consumption. This has reduced in recent months but Austria is still heavily dependent on Russia for its gas supply.

And following Gazprom’s announcement on Tuesday that gas prices could rise by up to 60 percent in the coming months for European customers, Austrian residents should expect further increases to their gas bills this winter.