Energy bills are soaring in Europe. What are countries doing to help you pay them?

·6-min read
Energy bills are soaring in Europe. What are countries doing to help you pay them?

The end of the month used to be a time to celebrate for many, who would joyously announce it was “payday” to friends and colleagues before declaring how they would reward themselves for their hard work - with a pint at the pub, a fancy dinner or a shopping spree.

But things have changed in the past few years. First, there was the pandemic, now it’s a combination of inflation and a cost-of-living crisis that’s stripping the payday of its happiness.

For many these days, money coming into their account almost immediately goes out or is already spent, as inflation drives up the cost of groceries and fuel, landlords increase rent and bills keep soaring.

Inflation jumped to a new all-time high of 8.9 per cent in July in Europe for the 19 countries bound by the euro, fueled by rising energy costs.

Electricity wholesale prices have increased in the first quarter of 2022 by 411 per cent in Spain and Portugal, 343 per cent in Greece, 336 per cent in France and 318 per cent in Italy compared to the same period in 2021, according to the European Commission.

There’s no sign of the energy crisis improving any time soon, as Europe prepares for the possibility that Russia will fully cut off its gas supplies in retaliation for Western sanctions over its invasion of Ukraine.

As energy prices surge while wages remain unchanged, some are living salary to salary and others are being forced to decide whether to spend their limited funds on keeping the lights on in their homes or filling the fridge.

Governments are aware that people are struggling, and that things will get worse this winter. This is why many countries across Europe are preparing to help.

UK

In the UK, energy prices this year have been growing more than in any year in the 1970s, when the country was suffering a catastrophic economic downturn. Andrew Bailey, the Bank of England’s governor, said Britons are facing a “historic shock to real incomes” because of these energy bill increases.

The government is stepping in to face this incoming crisis with a £400 (€475.6) energy bill rebate for every household, which will be either paid directly to accounts that have an automatic payment set up towards their energy provider, or which could be separately claimed by the families.

Households that are already struggling to make ends meet and have already received government benefits will also get a one-off “cost of living” payment of £650 (€773) on top of the £400 discount, and pensioners will receive an extra payment of £300 (€357) this winter.

People with disabilities are also set to receive a payment of £150 (€178) to cover the increased cost of living.

Italy

Italy, which like other countries in Europe is suffering from being weaned off Russian gas provisions after deciding to reduce its reliance on Moscow, has pledged a €14 billion fuel subsidy and investment plan to keep energy bills in check and avoid increases that would make these unaffordable for many families.

The country is also planning to hand out a €200 bonus to workers earning €35,000 a year or less, and offer a 20 per cent tax credit for energy-intensive companies seeing prices rising over 30 per cent. On the other hand, Italy has announced its intention to tax companies profiting from higher energy prices.

Domenico Stinellis/AP
Inflation jumped to 8.6 per cent in June in Europe for the 19 countries bound by the euro, including Italy. - Domenico Stinellis/AP

Spain

Like Italy, Spain has decided to tax those energy companies profiting from the increase in energy prices and use the money raised to help its citizens pay the bills.

Madrid has already cut value-added tax (VAT) on energy bills from 21 per cent to 10 per cent, while also cutting an existing tax on electricity from 7 per cent down to 0.5 per cent.

Like Portugal, Spain currently enforces a one-year long cap on gas prices, agreed by the European Commission, which ensures they remain lower than an average of €50 per megawatt-hour.

France

France is also offering a one-off payment to its citizens to help them face hard times, though at just €100 this is considerably lower than in the UK and Italy.

But France has stepped up its game at the source, forcing the state-owned energy provider EDF to limit electricity wholesale price rises to 4 per cent for a year. The move is expected to cost €8.4 billion.

The country’s domestic tax on final electricity consumption (TICFE) has also been curbed from €22.50 per megawatt hour to only €1 per megawatt hour for households, and €0.50 for businesses. The French government aims for this move to limit electricity price increases to 4 per cent, compared to an expected 45 per cent.

Markus Schreiber/Copyright 2022 The Associated Press. All rights reserved
Germany's parliament approved a plan to allow people to use local transport across the country for just €9 per month this summer. - Markus Schreiber/Copyright 2022 The Associated Press. All rights reserved

Germany

Germany, which has recently struggled to curb its heavy dependency on Russian gas, has approved two relief packages for a total of €30 billion to help its citizens with rising energy prices this year.

The German government will offer a one-off energy price flat rate of €300 to all taxpayers, transferred to them via their employer's payslip. Families receiving child support will get an extra €100 per child, while people on benefits will receive a €200 one-off payment. Those on housing assistance will get a €270-worth top-up for people on housing assistance.

The country is also offering subsidised public transport tickets.

According to data from price comparison portal Check24, around 4.2 million German households are bound to see their electricity bills rise by an average 63.7 per cent this year, while 3.6 million will face gas bills 62.3 per cent higher than last year.

The Netherlands

The Dutch government, which is expecting inflation to hit 5.2 per cent this year, is offering eligible households a one-off energy allowance of €800.

It's also lowering VAT on energy from 21 per cent to 9 per cent and cutting duty on petrol and diesel by 21 per cent, a cap which will remain in place until the end of the year.

Norway

As energy market prices increase around the world, Norwegians will only pay a set amount decided by the government last year. According to a scheme introduced by the government in 2021, Norwegians only pay bills in full when prices are under 70 crowns (€7) per kWh. When energy bills pass that threshold, the government covers 80 per cent of the total.

Despite this, Norwegians are apparently still struggling to pay their bills, and the government is mulling other options to help out households this winter.

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