On June 23, 2022, Federal Minister for Economic Affairs Habeck declared the second stage of the gas emergency plan, known as the “alert stage.” This emergency plan consists of three stages: the early warning stage, the alert stage, and the emergency stage. The early warning stage was already declared on March 30, 2022. At this stage, there is no state intervention in the gas market. The alert stage is activated in the event of a significant deterioration in the gas supply situation. Even at this stage, the state does not intervene in the market. The third stage (emergency stage) is declared when there is exceptionally high demand for gas or the gas supply is disrupted. At this level, “non-market-based measures” are taken to ensure gas supply. In Germany, the Federal Network Agency becomes the “federal load distributor” in this case. It can then regulate how gas is distributed in coordination with the network operators. The emergency level has not yet been declared.

Gas and electricity prices have risen sharply. The government wants to ease the burden on citizens by providing cheaper basic services. Price caps, the electricity price cap and the gas price cap, are intended to ensure this. Furthermore, as immediate aid, the federal government will cover the December advance payment for gas and heating for private and small and medium-sized commercial customers.

• December advance payment: For private households and small to medium-sized enterprises (under 1.5 million kilowatt hours of gas consumption per year) that use gas or district heating, the government will cover the advance payment for December. The amount of relief is not based on actual consumption, but on the annual consumption forecast for September 2022.
• Gas price cap: For private households and small to medium-sized enterprises (less than 1.5 million kilowatt hours of gas consumption per year) as well as for associations, the gas price is to be capped at 12 cents per kilowatt hour from March 2023 at the latest (this will apply retroactively for January and February) until April 2024. This only applies to 80% of the previous year's consumption. Anyone who consumes more will pay the market price.Electricity price cap: From January 2023, the electricity price for private households and small and medium-sized enterprises is to be capped at 40 cents per kilowatt hour. This only applies to basic consumption, i.e. 80 percent of the previous year's consumption. Only those who consume more would have to pay more. For industrial customers, the cap is different, at 13 cents for 70 percent of the previous year's consumption. Inflation adjustment bonus: Employees should be able to receive a tax- and duty-free bonus of up to €3,000 from their employer until the end of 2024. The employer's contribution is voluntary, so they can decide for themselves whether and how much of the bonus to pay.

The term inflation describes the rise in price levels, which is accompanied by a devaluation of money. This means that the purchasing power of money decreases.

The inflation rate shows the extent to which prices for goods and services have risen over a specified period of time. In Germany, it is calculated by the Federal Statistical Office using the consumer price index.

This measures the average monthly price development of all goods and services purchased by private households for consumption purposes. This consumer price index is compared with the previous year and the change is referred to as the inflation rate.

In general, a distinction can be made between demand-driven and supply-driven inflation.

The former arises when demand exceeds supply and companies are therefore able to charge higher prices for the goods they offer. Reasons for this type of inflation include, for example, growth in exports, an increase in government investment, or increased consumption by private households.

In supply-driven inflation, the general price level is pushed up by increased costs for companies or rising corporate profits. Reasons for this can include higher wages or rising prices for raw materials and energy.

Currently, most price increases are due to high energy prices. Disruptions in supply chains caused by COVID-19 and the war against Ukraine have led to a shortage of gas, oil, and other commodities.

Higher energy prices are driving up production costs for many goods, which is affecting retail prices. Price increases had already occurred previously due to supply bottlenecks during the pandemic and simultaneous high demand.