A scheme for limiting prices for energy resources has been developed

The sharp rise in prices for gas, electricity and heat has hit Dutch households hard. The government plans to temporarily limit the maximum prices for these types of goods for the people of the country. The design of the scheme is fully completed. The scheme has already been developed, it is expected that the energy price ceiling will come into effect on January 1, 2023 and will be in effect throughout the year.

How will the price cap work?

The maximum prices for gas, heat and electricity will only apply to small energy consumers. Formally, the prices for energy resources will remain at the contractual level, however, a price ceiling will be set for consumption volumes up to the established standards. Excess consumption will be paid in accordance with the energy supply agreement concluded with energy companies.

Planned consumption volumes and prices for energy resources within price limits:

It is expected that 50-60% of households in the Netherlands will be able to stay within these consumption ranges and will receive energy resources only at the lowest possible prices. Consumers will not have to draw up any additional contracts, the companies themselves will issue invoices up to the established volumes at the established prices, and above these volumes - at the agreed prices.

The government has specifically examined the compliance of this scheme with European laws and regulations. No violations were found, so the scheme can be entered immediately after the final decision is made.

What problems have arisen?

When developing the price ceiling scheme for energy resources, two main problems were identified:

1. Some small consumers receive gas, electricity and heat under group contracts. That is, the energy companies have an agreement not with end consumers, but with some association of them. In the Netherlands, such a connection scheme is called block (blokaansluiting). These consumers are not yet subject to the price capping scheme. The government is collecting the necessary information to apply to Parliament with a request to solve this problem.
2. Some energy producers with low costs may receive unjustified profits due to the imposition of a price ceiling. To prevent this from happening, energy producers will set the maximum profit, based on data from recent years. Energy companies will be able to exclude 1 year in which their profits fell sharply, for example, due to restrictions related to the COVID-19 pandemic. The price-capping scheme will work through government subsidies, so that companies that make unjustified profits will return them to the budget.

To operate under the price cap scheme, energy companies will be able to request an advance through the Dutch Enterprise Agency (Rijksdienst voor Ondernemend Nederland - RVO). The RVO will monitor how subsidy schemes work in practice. The size of the advances will depend on the volume of the proposed supply of energy resources and the difference between the price ceiling and the rates under the company's contracts.

It is expected that the final decision to introduce the energy price cap scheme from January 1, 2023 will be made on December 15, 2022.