Government Reaches Agreement

Starting this summer, a “10-cent price guarantee” will apply to electricity

Electricity has become increasingly expensive in recent years due to numerous global crises.(Bild: Jiri Hera - stock.adobe.com)

Following the massive spikes in energy prices in recent years, the ÖVP, SPÖ, and NEOS have now agreed on an automatic electricity price cap designed to provide relief to all Austrians during times of crisis. If the price of electricity rises above a set limit, a “10-cent guarantee” will automatically take effect.

The government is drawing conclusions from the energy crises of recent years: The new electricity price cap is set to take effect as early as this summer, as agreed by the government on Tuesday evening. At its core is the automatic guarantee, which is intended to cap costs for households during times of crisis. The goal is to cushion price spikes—such as those following the war in Ukraine—in the future and prevent new surges in inflation.

As long as necessary, as short as possible.

SPÖ-Staatssekretärin Michaela Schmidt über die geplante Strompreisbremse ab Sommer

Bild: APA/HANS KLAUS TECHT

The mechanism is triggered automatically as soon as the average electricity price for end customers rises above 16.5 cents per kilowatt-hour. In this case, the price for a basic consumption of 2,900 kilowatt-hours per year is capped at a net ten cents. According to E-Control, the current average is currently around 14 cents. 

Electricity has become increasingly expensive in recent years due to numerous global crises.(Bild: Jiri Hera - stock.adobe.com)

In principle, all households in Austria are set to benefit. For electricity consumption exceeding the basic allowance, the market price will continue to apply. The government also aims to maintain an incentive to conserve energy—for example, for households with electric heating or particularly high energy consumption.

SPÖ chief negotiator Schmidt sees this as an important safeguard: “This will prevent skyrocketing electricity prices from causing inflation to spiral out of control again in the future.” The measure is to be financed through the existing energy crisis levy paid by electricity producers. Revenue from this levy automatically increases as market prices rise. According to the government, no additional burden on the national budget is planned.

No maximum duration planned
How long the price cap remains in effect depends on developments in the energy market. No maximum duration is planned. The regulation will only end once prices fall below the set thresholds again. Government sources state: “As long as necessary, as short as possible.” Funds are also earmarked for small and medium-sized enterprises under the energy crisis mechanism to reduce electricity prices.

According to insiders, the electricity price cap was linked to the much-heralded industrial electricity price, which the ÖVP was determined to see implemented. This was agreed upon in parallel by the coalition parties. A price of up to five cents per kilowatt-hour is to apply to 50 percent of companies’ electricity consumption.