Price Cap
ÖVP grandees are lining up to undermine chancellor Karl Nehammer's authority, this time by proposing a cap on electricity prices, which he opposes
Servus!
It’s never a good sign when members of your own political party are briefing against you off-the-record. Worse still is when your senior colleagues feel your leadership is so demonstrably weak that they can go to the media and propose alternative policy ideas without fear of repercussion. This is the position chancellor Karl Nehammer now finds himself in, as the People’s Party (ÖVP)’s numbers continue to tank in the polls and party grandees look ahead to a fall and winter that will make the effects of inflation witnessed in spring and summer seem like child’s play.
First to poke her head above the parapet was Lower Austria governor Johanna Mikl-Leitner. She used an interview with the freesheet Österreich over the weekend to call for the introduction of a cap on electricity prices. Her very public intervention gave license to her fellow governors in Upper Austria and Styria, Thomas Sletzer and Christopher Drexler, to follow suit. Salzburg’s Wilfried Haslauer too has backed looking into an electricity price cap, while Österreich has reported that the Austrian Federation of Workers and Employees (ÖAAB), the ÖVP’s political arm in the trade union movement, also supports Mikl-Leitner’s position out of fear of losing voters to the Social Democratic Party (SPÖ) and Freedom Party (FPÖ).
While’s the cat’s away, the mice will stab you in the front. Nehammer is currently on an official visit to Israel. There, he signed a strategic partnership with Israeli prime minister Yair Lapid, one which among other things allows to future deliveries of Israeli gas to Austria. Nehammer has thus far resisted calls to institute an energy price cap. Sources close to the chancellor have characterized Mikl-Leitner’s intervention as an act of desperation on the part of a governor worried about her own numbers and the possibility of losing her absolute majority in Lower Austrian regional elections due in the spring. Consider too that Mikl-Leitner may also be someone who sees herself as chancellor as one day.
As inflation and Russia’s invasion of Ukraine continue to place pressure on and push up wholesale gas prices—Russia shut down Nord Stream 1 for ‘maintainence’ this week, lest we forget—an electricity price cap would, in theory, stabilize people’s domestic energy bills. If the British example is anything to go by, an electricity price cap would regulate the maximum price energy suppliers could charge their customers for electricity. The British price cap is adjusted every six months, taking into account such factors as wholesale energy costs as well as network and other operating expenses.
An electricity price cap would be advantageous for Nehammer in the sense that it would make him seem as if he were doing something to halt rising energy prices, but the British case also demonstrates the policy’s limits. For one, the rising cost of wholesale prices has meant that the price cap has had to go up with it as to avoid further destabilizing the market. In April, the energy price cap was raised by 54 percent, and the UK regulatory agency Ofgem is preparing consumers for another wallet-busting increase of 42 percent this October. By next year, the average consumer in Britain may be paying around £3,363 per annum for electricity and gas.
Other ÖVP grandees are cautious about intervening in the energy market and subsidizing profitable energy companies. An energy price cap is not the only suggestion coming out of Austria’s states. A temporary reduction or elimination of the VAT on domestic energy is another proposal floated by Salzburg governor Haslauer. The federal government, meanwhile, has distributed its €150 energy vouchers to every household in the land, 1.5 million of which have already been cashed in. Still, though Mikl-Leitner’s intervention may have been opportunist, she’s right to sense vouchers won’t be enough. Just look at the headlines in the freesheets: “One warm shower a day will soon cost everyone up to €1,200.” Without further intervention, her party—and her voters—are headed for a world of pain this winter.
Bis bald!
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