German local utilities group VKU said on Friday the government’s draft plans to phase out hard coal fired power stations in the coming years as part of its climate efforts were a threat to its members’ income.

VKU represents stakeholders in some 4,000 megawatts (MW) of power generation fueled by imported hard coal, out of Germany’s current total of around 20,000 MW hard-coal burning capacity.

The government plans, circulated on Tuesday, entail forced closures of hard coal units after 2027 if owners do not use the chance to compete in compensation tenders that will be held between 2024 and 2026.

The government wants these auctions to accompany a wider scheme, due to be passed next week, which extends to the related brown coal mining and burning industry, with all coal activities ending by 2038 at the latest.

Big brown coal groups including RWE and Uniper, which also operate hard coal plants, stand to benefit from partial state funding for lay-offs and some payoffs for lost assets in the deal.

But small companies, known as Stadtwerke, for whom stakes in hard coal plants can weigh heavily in budgets for local services, face possible write-downs running to hundreds of millions of euros in individual cases, managing director Michael Wuebbe said.

He said the government had pushed some brown coal closures back to later years and was now looking for a stopgap to compensate for the related CO2 impact, which instead would now hit even modern hard coal plants.

Berlin had been encouraging these in recent years to help local firms become a counterweight to incumbent sector leaders and was now letting them down, he said.

Southern German municipalities were particularly concerned because the energy regulator often forbids closures, which would exclude owners from competing in auctions, in that region.

This is because new power lines are behind schedule, meaning there is not enough transport capacity for alternative green power.

Unlisted hard coal-to-power generator Steag also said should there not be significant improvements to the current draft before it is passed to the cabinet and presented to parliament, it would consider taking legal action against it.

Steag operates 5,500 MW of hard coal power in Germany.