EU: In detail the extraordinary measures of the political agreement to reduce energy prices

EU energy ministers earlier reached political agreement on a proposal for a Council regulation to tackle high energy prices. The Regulation introduces common measures to reduce electricity demand and to collect and redistribute surplus energy sector revenues to end customers.

-Reduction of electricity demand

The Council agreed a voluntary target of a 10% overall reduction in gross electricity consumption and a mandatory target of a 5% reduction in peak electricity consumption. Member States will identify 10% of peak hours between 1 December 2022 and 31 March 2023 during which they will reduce demand. Member States will be free to choose appropriate measures to reduce consumption for both targets during this period.

-Cap on market revenue for electricity generation through different technologies

The Council agreed to cap the market revenue at €180/MWh for electricity producers, including intermediaries, using different technologies to produce electricity, such as renewables, nuclear and lignite. Such operators have made unexpectedly large financial gains in recent months, without increasing their operating costs.

The level of the cap is designed to maintain the profitability of operators and avoid hindering investment in renewable energy sources.

Member States agreed to use measures of their choice to collect and redirect surplus revenue to support and protect electricity end customers. Member States have introduced some flexibilities to reflect their national circumstances and the measures in place at national level. These include the ability to set a higher revenue cap, use measures that further limit market revenue, differentiate between technologies, and apply limits to the revenue of other actors, including merchants, among others.

In cases where a Member State’s net dependence on imports is equal to or greater than 100%, they will conclude an agreement by 1 December 2022 on the adequate sharing of surplus revenue with the exporting Member State. Other Member States are also invited to conclude such agreements.

-Solidarity contribution for the fossil fuel sector

Member States agreed to set a mandatory temporary solidarity levy on the profits of companies operating in the crude oil, natural gas, coal and refining sectors. The solidarity levy will be calculated on taxable profits, as determined by national tax rules for the financial year starting in 2022 and/or 2023, which are more than 20% higher than the average annual taxable profits from 2018 The solidarity levy will apply in addition to the regular taxes and levies applicable in the member states.

Member States may maintain national measures equivalent to the solidarity levy provided that they are compatible with the objectives of the Regulation and generate at least comparable revenues.

Member States will use the revenue from the solidarity levy to provide financial support to households and companies and to mitigate the effects of high retail electricity prices.

-Retail measures for small and medium enterprises

The Council agreed that Member States can temporarily set a price for the supply of electricity to small and medium-sized enterprises to further support SMEs facing high energy prices. Member States have also agreed that they may exceptionally and temporarily set a price for the supply of electricity which is below cost.

The measures are temporary and extraordinary in nature. They will apply from 1 December 2022 to 31 December 2023. Energy reduction targets will apply until 31 March 2023. The mandatory market revenue cap will apply until 30 June 2023.

Member States have introduced specific exceptions for Cyprus and Malta.

RES-EMP

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