Commission: The proposals against the energy crisis – At the meeting of September 30

The European Commission today detailed its proposals to tackle soaring gas and electricity prices, mainly by limiting the “super profits” of energy groups and by cutting the European Union’s consumption during peak hours.

The European Union’s energy ministers will discuss these proposals during an extraordinary session on September 30 in Brussels.

Revenue ceiling

In the European electricity market, the cost price of the last source of electricity used to meet demand – often a natural gas station to generate electricity – determines the price charged to all operators: the wholesale price of electricity has surged following the spike in natural gas prices as a result of the war in Ukraine.

The European Commission proposes the imposition ceiling on the revenues of electricity producers through nuclear and renewable energy sources (wind, solar, hydro), from which they derive excess profits by selling its output at a price much higher than the cost of production.

According to the relevant text, the Commission proposes to define it ceiling of 180 euros/megawatt hour. The difference between the level of incomes and the wholesale market price will be attributed to EU states to be redistributed to households and businesses. Carbon and methane have been excluded from this mechanism.

Imposing a ceiling will yielded more than 140 billion euros, assured the President of the Commission, Ursula von der Leyen. Beyond the current energy crisis, it promises a deep reform of the electricity market.

This package varies greatly from country to country, depending on the energy mix used in each country and is varied.

“Contribution” of oil and gas groups

Brussels is seeking a “temporary solidarity contribution” from gas, coal and oil producers and distributors, who are making huge profits thanks to soaring prices. “These large companies will have to pay a fair share, to make a contribution to the crisis,” explained the president of the Commission.

According to the text of the European Commission’s proposals, this contribution will be set at 33% of surplus profits (profits 20% higher than the average of the years 2019-2020). Brussels is careful not to talk about a “tax”, because any measure of a tax nature requires unanimity among the 27, a process that is complex and fraught with risks compared to taking a decision with a qualified majority.

Limiting demand during peak hours

According to the plan, the Commission wants to set a binding target for states to reduce electricity consumption “by at least 5% during the specified peak hours during which electricity will be more expensive. According to Brussels, this would allow a 3.8% reduction in natural gas consumption in electricity production.

The Commission also calls on the 27 to reduce monthly consumption by 10%, a target that is considered indicative.

Each country will choose its own way to achieve the goal, for example “through auction systems” that will offer monetary compensation to industries in exchange for reducing their consumption.

Support for providers with a lack of liquidity

Brussels wants to support energy providers hit by severe liquidity shortages due to price volatility by easing the regulatory framework and introducing anti-speculation mechanisms to limit market swings.

“We will change the temporary regulatory framework for state subsidies in October to allow for state guarantees,” Ursula von der Leyen announced today.

Ceiling on natural gas prices?

In the original proposals, the Commission planned to cap the prices Russia is paid for gas deliveries to the European Union to reduce the Kremlin’s revenue, an idea opposed by eastern European countries, which are still very dependent on Russian hydrocarbons.

Instead, ministers from the 27 asked in Brussels on Friday to study the possibility of imposing a ceiling on all natural gas imports into the EU, whatever its origin, including liquefied natural gas (LNG), which Europe pays at a price much higher than in Asia.

However, the European Union must remain a fairly attractive market for LNG suppliers, who can easily find other customers elsewhere, warned the Commission, which is taking a cautious stance on this divisive issue among member states.

RES-EMP

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