BERLIN—Moving to prevent a political backlash over the costs of shifting from nuclear power to alternative energy, a senior ally of Chancellor Angela Merkel announced plans to cap the rise in household electricity prices and force industry to pay a greater share of the bill for Germany's energy shift to renewable power.

Environment Minister Peter Altmaier said the government would propose legislation that could be passed by August to freeze subsidies to renewable-power producers at current levels until the end of 2014. After...