European Union Energy Commissioner Gunther Oettinger and Competition Commissioner Joaquin Almunia earlier this year had started a preliminary probe of certain aspects of Germany's Renewable Energies Act, or EEG, a key element of Berlin's shift away from nuclear power and toward green energy.
Under the provisions of the law, electricity consumers are required to pay a "eco-levy" on their bills to finance the transition, which this year is being raised from 7.089 to 8.463 U.S. cents per kilowatt-hour.
An average household consuming 3,500 kilowatt-hours would face an additional cost of more than $80 per year, including value added tax.
However, energy-intensive industries such as steel, aluminum and chemicals since 2003 have been granted exemptions from the surcharges in the name of international competitiveness.
Industry leaders and the German government have maintained the exemptions are necessary to preserve thousands of jobs, but the commission says they appear to violate EU state-aid rules.
In 2010 an amendment to the EEG significantly lowered the threshold under which a business could qualify for the exemptions from 10 gigawatt hours per year to only 1 gigawatt-hour, thus extending the discounts to hundreds of more businesses.
This has prompted competitors in neighboring countries to file an official complaint about the benefits with the European Commission.
Almunia, the EU's antitrust commissioner, has indicated in internal documents he considers German lawmakers to be deliberately favoring energy-intensive companies, thus threatening to distort competition and obstruct trade, Der Spiegel reported.
Brussels revealed Wednesday it is moving ahead with an "in-depth inquiry" into the matter just as Germany's Christian Democratic Union and Social Democratic Party have established a new coalition government.
The opening of an in‑depth investigation gives third parties an opportunity to comment on the probe.
"The [surcharge exemptions] seem to give the beneficiaries a selective advantage that is likely to distort competition within the EU internal market," the commission said.
Sigmar Gabriel, Germany's new economics minister, denied the exemptions are meant to give German industry an unfair advantage and accused Brussels of meddling in the internal affairs of member nations.
"From the perspective of the federal government, providing EEG exemptions for energy-intensive companies does not constitute 'state aid' and is compatible with EU law," he said. "The preservation of the international competitiveness of German and EU industry is a key economic policy objective."
He emphasized reform of the EEG is on the agenda of the new government, and indeed was a key element in the negotiations to form the "black-red coalition" now leading the country, with proposals due in the spring.
"Against this background, the federal government is already in a very intense and constructive dialogue with the commission on the future shape of the EEG and the special equalization scheme," he said.
Meanwhile, the German steel industry warned a requirement to end the exemptions, or indeed pay them back dating to 2003, would have a crippling effect on the economy, Die Welt reported.
"The steel industry urgently needs the existing relief scheme to be competitive internationally," German Steel Federation President Hans Jurgen Kerkhoff said in a statement. "A discontinuation would threaten job losses."
The industry will make 2014 EEG apportionment payments of around $400 million, but without hardship provisions, it would be closer to $1.4 billion, he said -- approximately the amount that is invested in the entire steel industry each year.
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