Germany is approaching gas rationing on heightened alert

German Economy Minister Robert Habeck will later on Thursday launch the second stage of the country’s three-phase emergency gas plan, putting Europe’s largest economy on “alert level” after drastic cuts in supplies from Russia, according to a person familiar with the plan.

The heightened alert gives the government an opportunity to enact legislation that would allow energy companies to pass on cost increases to homes and businesses, while some coal-fired power plants could also be reactivated to minimize gas use. The third and highest “emergency” level would involve state control over distribution.

Habeck warned on Wednesday that Europe’s biggest economy should brace for further reductions in Russian gas flows after Moscow cut supplies on its main pipeline to Europe last week. He is scheduled to make a statement in Berlin at 10 a.m.

Dutch gas futures for the front month, the European benchmark, rose 1.7 percent to 129.30 euros ($136.62) per megawatt-hour in Amsterdam. Contracts have increased by more than 50% since state-owned gas giant Gazprom PJSC cut flows in the vital Nord Stream pipeline by about 60%.

Germany, which relies on Russia for more than a third of its gas supplies, issued the first “early warning period” in late March, as Kremlin demands for payment in rubles prompted Germany to brace for a potential supply disruption.

Habeck, who is also vice-chancellor in the ruling coalition, said Russia’s move to cut gas supplies through the Nord Stream pipeline by about 60 percent was politically motivated and aimed at unsettling markets.

The government’s latest move comes as Germany rushes to fill gas storage facilities, which are currently about 58 percent full. Energy companies have been building stocks to try to meet a government-mandated target of 90 percent capacity by November to get the nation through the winter.

Germany’s grid regulator, known as BNetzA, would ration if the government triggers the emergency level. The Bonn-based agency said leisure facilities were likely to experience supply cuts while protecting consumers and critical public services such as hospitals.

Gas is a key part of Germany’s energy mix and harder to replace than Russian coal and oil, which are phased out by the end of the year. About 15 percent of the electricity in Germany is generated from gas, which is also of crucial importance for heating households and for industrial processes in the chemical, pharmaceutical and metal sectors.

Germany has taken steps to secure supplies, including taking control of a local Gazprom subsidiary, renamed Securing Energy for Europe GmbH. The country is also building infrastructure to import liquefied natural gas from the US and other suppliers. Germany is approaching gas rationing on heightened alert

Fry Electronics Team

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