Energy market 29 July 2022 • 6 minutes
In mid-February, the government decided to reduce the VAT on electricity bills in order to counter the dramatic rise in energy prices, lowering it from 21% to 6% until the new year. The same decision was taken for gas in mid-March. In addition, the expansion of the social tariff to include certain consumer profiles was also extended until 31 December 2022. How much could Belgian households save as a result of these changes?
It’s no surprise that energy prices have been on the rise these past months. If we look at the dashboards produced by the CREG (the Belgian energy regulator), electricity bills have risen from €921.24 to €1,388.69 in a year*, an increase of 50,74%. Gas bills, meanwhile, have risen by a staggering 77,47% over the same period, from €1,290.37 to €2,290.03*.
There are a number of reasons for this increase: a major geopolitical conflict between Ukraine and Russia, the post-pandemic economic recovery, a reduction in the gas reserves on the European continent, and the increase in the cost per tonne of CO2.
To compensate for this increase, the government had already taken the initiative and, on 1 January 2022, implemented several measures aimed at helping households. These included expanding the social tariff to include various categories of consumers. In addition, the federal government set up a Gas-Electricity Fund, enabling the CPAS-OCMW public social welfare centres to offer material support to people who do not qualify for the social tariff.
Lastly, the federal contribution appearing on energy bills was replaced by an excise duty. This is a particularly important change since, previously, this part of the bill increased automatically, which is not the case with excise duty. The federal contribution is considered a surcharge on the energy bill, so its amount depends on the quantity of gas and electricity consumed by the end customer. In contrast, excise duty is an indirect tax on consumption or on the use of certain products, so its amount is fixed. As a result of this “freeze”, Cabinet Minister for Energy Tinne Van Der Straeten thinks that households may be able to avoid an increase of €30 per year on their bills.
*Data for June 2021 and June 2022. Since 1 March 2022, the VAT on electricity has been lowered from 21% to 6%, and the same applies for gas since 1 April 2022. Furthermore, stilll in April, the CREG has brought down the average gas consumption of a Belgian household from 23,260 kWh/year to 17,000 kWh/year.
In an attempt to lessen the impact on Belgian wallets, the government voted to reduce the VAT on electricity bills, first lowering it from 21% to 6% from 1 March until 30 September 2022. However, for technical and organisational reasons, this measure will was applied to monthly bills from April. FEBEG, the federation of energy suppliers in Belgium, announced in a statement that “the reduction in VAT appears simple to implement, but that is not the case. All the communications to customers and to the authorities need to be altered. Dozens of internal processes need to be modified and tested in detail.”
But, in practical terms, how has this reduction been reflected in the bill? Looking at a “typical” four-person family (two adults and two children), consuming an average of 3,200 kWh of electricity over the course of a year, the potential savings are €64 per year.
In mid-March, the KERN select ministerial committee met again to review some of the decisions it took in February. As a result, the reduction in VAT was also applied to natural gas. This began on 1 April. However, as with electricity, this reduction has, for practical reasons, only be seen on monthly bills from the month following the introduction of the measure.
As the energy crisis seems set to last, the government has decided to extend the 6% VAT reduction on energy until 31 December 2022.
In February 2021, the federal government decided to expand the social tariff to include BIM/BVT recipients. Multiple consumer profiles such as pensioners and single-parental families in financial difficulties and receiving specific benefits, as well as people with gross annual incomes of €20,000 or less then qualified for the measure. The aim of it was to help the most disadvantaged households at the height of the health crisis.
The expanded social tariff had already been extended to March 2022. But, in view of the current economic and energy situation, the government first decided to extend this measure until September this year and then until 31 December 2022. As a result, almost a million Belgian households qualify for this tariff, in other words almost a fifth of all househoulds in Belgium.
Good news for the entire population! In addition to the reduction in VAT, the federal government has also decided to issue energy vouchers (called a “heating bonus”) to the value of €100.
Little information had been provided on when this voucher would be introduced, but it eventually started being granted to Belgian househoulds in the third week of April 2022.
In practice, this heating bonus takes the form of a one-off deduction from the electricity bills of Belgians who have taken out a residential contract, whether fixed price or variable price. According to the government, applying this reduction to energy bills is the best way to give the bonus to all Belgian households, regardless of their method of heating (electricity, gas, oil or pellets).
At its last meeting, KERN also decided to grant a single, automatic reduction for all households which use oil or butane or propane gas for their heating. This support will apply retroactively for the whole of 2022. This means that if you have just placed a new order for oil, you will not need to cancel it to obtain this discount. You will receive it during the year regardless of your situation.
As yet, the government has made no announcement on possible measures after December. Such decisions will depend on the energy market situation at that time.
However, as a consumer, you can act now to limit the increase in your energy bill. The first thing you should do is compare your current contract with the tariffs available on the market at present. You can use our online comparison tool or contact our advisers free of charge on 0800 37 456, from Monday to Friday, 9.00 am to 6.00 pm or on firstname.lastname@example.org.
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