the EU plan to cap certain wholesale prices
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The European Commission is submitting three measures to member countries to reform the European energy market.
The European Commission proposes to cap part of wholesale electricity prices, to adopt regulated tariffs for the most vulnerable and to strengthen incentives to reduce consumption, according to a project consulted on Friday by AFP. “We must use part of the excessive profits that electricity producers are raking in today (…) to support low-income consumers and vulnerable businessessaid Commission President Ursula von der Leyen during a speech in Bavaria, southern Germany, on Friday.
The European executive announced on Monday that it was preparingemergency responseon the electricity market to limit the surge in household and business bills, while working on “structural reformto dissociate electricity prices from gas prices, which soared with the war in Ukraine.
In a document which will be examined on September 9 by the European energy ministers in Brussels, the Commission details three avenues of emergency measures, starting with a cap on wholesale prices for certain sources of electricity. Currently, on the European market, it is the cost price of the last source of electricity mobilized to meet demand at any time, which determines the price imposed on all operators on the continent: this is often from a gas-fired power plant.
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The other sources of energy (renewable, nuclear, coal) sell the electricity they produce at a price indexed to gas prices, much higher than their operating costs: Brussels therefore proposes to cap the price paid to these power stations , to put an end to the windfall profits made by energy companies.
“A greater degree of legal certainty»
In return, Member States couldgenerate additional financial revenue(different in each country depending on its energy mix), which they could use to support the most vulnerable consumers: direct aid, regulated tariffs, reductions in electricity bills.
This is the second recommended measure. “Less than half of states use regulated tariffs, while direct income support remains the most widely used instrument in the EU to support households», notes the Commission, which wants «provide a greater degree of legal certainty to extend regulated tariffs (…) in particular with the possibility of a clear derogation (to European rules) to also cover SMEs“.
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On the other hand, the European executive says it is against an indiscriminate cap on retail prices for all consumers, “an interventionist political measure that risks distorting the marketsand cost the States dearly.
Measures welcomed by the Spanish executive
Finally, in line with the plan adopted in July to reduce the EU’s gas consumption, Brussels is proposing to intensify the incentive measures to reduce the demand for electricity, in particular by remunerating consumers who restrict their needs, or via calls for tender awarding compensation to manufacturers in exchange for a given reduction in their consumption.
These proposals, not yet made public, have already been applauded by Spain, which benefits from a derogation to cap electricity prices due to a limited connection to European networks: “We welcome the fact that these measures, highly contested in the past, are now on the table“, reacted the Spanish Ministry of Ecological Transition.
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