Germany Mulls Compromise on Power-Fee Rebates to End EU Impasse

Chancellor Angela Merkel’s clash with the European Commission over power-fee rebates to German industry is easing as support grows in her ruling coalition to follow European Union-favored guidelines for the aid.

Lawmakers said they may agree to compensate companies by more closely following rules already in place under Europe’s emissions-trading system. That would reduce the number of big energy consumers eligible for rebates.

EU Competition Commissioner Joaquim Almunia’s guidelines are a “conceivable starting point” to assess which companies deserve help with power bills, Joachim Pfeiffer, the economy and energy spokesman of Merkel’s Christian Democratic Union, said in a phone interview. Germany can’t, however, accept an exact application of the rules. “That would push key industries abroad.”

The remarks indicate a softening of Germany’s stance as Merkel seeks to break an impasse in negotiations with the European Commission. The commission last month started a probe into the legality of the rebates to German companies from Bayer AG (BAYN) to Linde AG.

The negotiations will determine the future cost of electricity for German companies after a compulsory premium they and consumers pay to finance the country’s clean-energy expansion jumped 18 percent to 6.24 euro cents (8.54 cents) per kilowatt-hour this year. While 1,716 German companies made savings of about 4 billion euros on rebates from that fee last year, the ETS compensation program would crimp their eligibility if applied.

U.S. Competitors

The ETS allows member states to apply to the EU to recompense companies for outlays on carbon dioxide emission certificates. Only a narrow band of energy-intensive industries that are exposed to global competition are eligible. They include steel, paper, chemicals, fertilizers and copper production.

The German system of rebates “discriminates against some industries and benefits others,” Pfeiffer said yesterday. “It’s questionable whether transport and textile industries should benefit while branches like cement must be included if we adopt ETS rules.”

While the European Commission is probing the rebates on concerns they may be illegal, it will have to greenlight some aid that’s “necessary” to keep industry competitive amid low energy prices in the U.S., EU Energy Commissioner Guenther Oettinger said Jan. 21 in Berlin.

Tough Stance

Like Merkel’s conservatives, lawmakers from Economy Minister Sigmar Gabriel’s Social Democrats want Germany to maintain a tough stance to defend the interests of key industries like steel and chemicals, Dirk Becker, the SPD’s energy spokesman in parliament, said in an interview.

“Applying narrower ETS criteria is a feasible basis for calculating compensation for energy-intensive industries,” Becker said yesterday. “But we must stick to our guns that the commission is wrong in calling the aid a subsidy -- it isn’t, and industry must fundamentally be protected from soaring power costs.”

A spokeswoman for the Economy Ministry today declined to comment.

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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