The Commission proposes an emergency intervention on the European energy markets against the recent dramatic price increases. The EU faces the effects of a serious imbalance between energy supply and demand, largely due to Russia’s continued exploitation of energy resources for war purposes. To alleviate the growing pressure on European households and businesses, the Commission takes a further step to resolve this situation by proposing exceptional measures to reduce the demand for electricity, which will help reduce the cost of electricity for consumers, and measures to redistribute surplus revenues from the energy sector to end customers. The proposal follows previously agreed measures for the filling of gas deposits and for the reduction of gas demand in preparation for next winter. The Commission also continues its efforts to improve liquidity for market participants, reduce the price of gas and reform the longer-term structure of the electricity market.
The first response to high prices is reduced demand, which can impact electricity prices and generally calm the market. To intervene on the most expensive times of consumption, when the electricity produced with gas has a significant impact on the price, the Commission proposes the obligation to reduce the consumption of electricity by at least 5% during peak times of the selected prices. Member States will have to identify peak price times, equal to 10% of total hours, with the highest expected price and reduce demand in those periods. The Commission also proposes that Member States take steps to reduce overall electricity demand by at least 10% until 31 March 2023. Member States will be able to choose the appropriate measures to achieve this, including financial compensation. The reduction in demand during peak periods would allow a reduction in gas consumption during the winter of 1.2 billion cubic meters. Increasing energy efficiency is also an essential element in meeting our climate commitments under the European Green Deal.
The Commission also proposes to apply a temporary ceiling on the revenues of “inframarginal” electricity producers, who generate electricity with less expensive technologies, such as renewables, nuclear and lignite, and feed the grid at a lower cost than the level price set by “marginal” producers, who have higher costs. Intra-marginal producers had exceptional revenues, with relatively stable operating costs, as expensive gas plants pushed up the wholesale price of electricity. The Commission proposes to set the cap on intra-marginal revenues at EUR 180 / MWh, so as to allow producers to cover investment and operating costs without compromising investments in new capacity, in line with our energy and energy targets. climate for 2030 and 2050. Revenues that exceed the ceiling will be collected by the governments of the member states and used to reduce the bills of energy consumers. Member States trading in electricity are encouraged, in a spirit of solidarity, to conclude bilateral agreements to share part of the infra-marginal profits taken in the producing State for the benefit of the end users of the importing Member State. These agreements must be concluded by 1 December 2022 if a Member State’s net electricity imports from a neighboring country are at least 100% of consumption.
The Commission is also proposing a temporary solidarity contribution on excess profits generated by activities in the oil, gas, coal and refining sectors which will not be subject to the cap on intra-marginal revenues. This time-limited contribution would maintain investment incentives in the green transition. It would be levied by the Member States on the part of the 2022 profits that exceeds a 20% increase on the average profits of the previous three years. Revenues would be taken from Member States and passed on to energy consumers, in particular vulnerable households, the most affected companies and energy-intensive industries. Member States can also finance cross-border projects in line with REPowerEU objectives or use part of the revenues to jointly finance employment protection measures or to promote investments in renewable energy and energy efficiency.
As a further intervention on the rules of the electricity market, the Commission also proposes to expand the package of measures on energy prices available to help consumers. The proposals would allow for the first time the regulation of electricity prices below cost and would extend regulated prices to small and medium-sized enterprises as well.
How announced On Wednesday 7 September by President von der Leyen, the Commission will also continue to work to reduce prices for consumers and industry in Europe and ease the pressure on the market. The Commission will deepen the discussion with Member States on the best ways to reduce gas prices, also looking at different ideas on tariff caps and on strengthening the role of the EU energy platform in facilitating lower price agreements with suppliers through voluntary joint purchases. The Commission will also continue to work on tools to improve liquidity in the market for energy suppliers and will review the Temporary Crisis Framework for State Aid to continue to allow Member States to provide necessary and proportionate support to the economy, while ensuring a level playing field. At the Extraordinary Energy Council on 9 September, the energy ministers of the Member States approved the work carried out so far by the Commission in these sectors.
The Commission has been addressing the issue of rising energy prices for a year and Member States have taken nationally several measures that the Commission had made available through the package of measures on energy prices adopted in October 2021 and expanded in spring 2022 with the communication on short-term interventions in the energy markets and long-term improvements in the structure of the electricity market and with the REPowerEU plan. The situation on the energy market has deteriorated considerably after Russia invaded Ukraine and Russia’s use of energy resources to blackmail Europe, resulting in exacerbating a supply situation. already difficult after the COVID-19 pandemic. The Commission has already presented proposals for new minimum storage obligations and new gas demand reduction targets to facilitate the balance between supply and demand in Europe, which were quickly adopted by Member States before the summer..
Russia continued to manipulate gas supplies, interrupting deliveries to Europe for unjustified reasons and bringing tension and nervousness to the markets. Prices increased further in the summer months, also due to the extreme weather conditions caused by climate change. In particular, drought and excessive heat have had an impact on the production of electricity from hydroelectric and nuclear sources, further reducing the supply. For this reason the Commission is now proposing a Council regulation, based on the‘article 122 of the Treaty, which provides for an emergency intervention in the electricity market, with common European tools to deal with high prices and correct system imbalances between electricity suppliers and end users, while preserving the global functioning of the market internal energy and preventing risks to security of supply.CopyAMP code
Statements by the members of the college of commissioners:
President Ursula von der Leyen said: “With aggression and manipulation Russia is affecting the world and European energy markets and we must be steadfast in our response. Member States can rapidly adopt and implement the further proposals presented by the Commission today to alleviate the pressure on households and businesses. We stand united in the face of Putin’s gas weapon as we take concrete action to minimize the impact of gas prices on electricity costs in these exceptional times. “
Frans Timmermans, Executive Vice President, said: “These unprecedented measures are a necessary response to the difficulties in energy supply and the surge in energy prices affecting Europe. In order for these measures to have the desired effects overall, the reduction of demand is fundamental: it reduces the amount of bills, prevents Putin from continuing to use energy resources as a weapon, reduces emissions and helps to rebalance the energy market. An excessive revenue cap will allow energy companies that have benefited from abnormally high profits to show solidarity with their troubled customers. But first of all, this crisis heralds the end of the era of low-cost fossil fuels and the need to accelerate the transition to renewable energy produced in Europe. “
Kadri Simson, Commissioner for Energy, said: “Today we are adopting an emergency intervention on the structure of our electricity market, limiting revenues for low-cost electricity producers and authorizing exceptional measures on price regulation for businesses and households. Thus we will allow Member States to increase and redirect revenues towards those who need them at this difficult time, without compromising the long-term functioning of the market ”.
Paolo Gentiloni, Commissioner for the Economy, said: “Our proposal for a solidarity contribution from the fossil fuel industries will make it possible to address the current energy crisis in a spirit of fairness. In these exceptionally difficult times for many, fossil fuel companies have benefited from abnormally high profits. It is therefore essential that they do their fair share to support vulnerable families and sectors most affected and to support the huge investments needed in renewable energy and energy efficiency. This is because in the face of Putin’s exploitation of energy, we need a collective effort of solidarity to build a safer and more sustainable Europe. “