London (Platts)--28Nov2012/233 pm EST/1933 GMT

Germany's cabinet Wednesday agreed new rules that will see energy-intensive companies get paid for allowing their power supply to be switched off in order to balance the grid, a practice known as demand-side management (DSM). The compensation payment will add approximately Eur1-2/year to a typical household electricity bill, the government said. The new rules are restricted for the coming three years, it added. According to the ordinance regulating interruptible loads, grid operators will issue monthly tenders for 3,000 MW of demand capacity from energy-intensive users, such as steel plants or aluminum producers, which will get compensated for allowing their power supply to be switched off. Approximately half of this capacity would be switched off within seconds, while another 1,500 MW must be able to be disconnected within 15 minutes, a spokeswoman for the economy ministry told Platts. The firms will receive Eur1,667/MW ($2,149/MW) each month if they enter such an agreement with the grid operator, according to German media reports. The companies will also get compensation of Eur100-500/MWh for the actual disconnection of their power supply, the reports added. Germany's power grid has become a bottleneck in the transformation of the country's energy landscape to intermittent renewable power sources, with grid operators especially struggling to balance the grid at times of excessive wind power generation. --Andreas Franke, andreas_franke@platts.com --Edited by Jonathan Fox, jonathan_fox@platts.com