Germany Prepares to Trigger Second Stage of Emergency Gas Plan

(Bloomberg) — Germany is preparing to trigger the second stage of a three-stage emergency gas plan, a move that may mean passing along higher prices to industry and households.

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The government may soon move to the “alarm” stage, according to a person familiar with the matter. The country has been at the “early warning” stage since March 30.

Germany is seeking to reduce gas use to shore up inventories after Russia cut deliveries last week by about 60% through a key pipeline. Economy Minister Robert Habeck said the move by Russia was aimed at unsettling the markets.

Gas buyers have been struggling since last week to replace missing volumes from Russia. Companies are still able to add to inventories, which are now at 58%. Germany is seeking to prepare for winter by filling storage facilities to 80% by Oct. 1 and 90% by Nov. 1.

Triggering the second stage of Germany’s emergency plan could mean a change in the law that would allow energy companies to pass on cost increases to homes and businesses. It may also include firing up more coal plants to minimize gas consumption. The measures are still being analyzed by the government.

The actions may spell another blow for Europe’s biggest economy, which is already facing increasing inflation rates. Industries from chemicals to steel have already warned that they may have to close factories and reduce production due to higher energy costs.

European natural gas prices jumped 33% this month, reaching 125 euros per megawatt-hour on Tuesday. Prices were 30 euros a year ago.

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Germany has been bracing to shift away from Russian gas, tapping liquefied natural gas imports and other available sources after sanctions imposed on Russia raised the risks of gas cuts.

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If Germany ratchets up its gas plan to the highest level, “emergency,” the state would assume control of the country’s entire distribution network.