On the eve of an European summit focusing on the EU’s response to Russia’s invasion of Ukraine, the European Commission will present a new communication on the EU’s security of energy supply and the fight against rising energy prices on Wednesday 23 March.
A draft of the Communication, obtained by EUROPE, outlines the Commission’s plan.
According to the paper, the Communication aims to present the pros and cons of “concrete exceptional short-term options to temper price spikes” and proposes “collective European actions to address the root causes of the problem in the gas market with a view to ensure security of supply at reasonable prices for next winter and beyond”.
Mitigating rising electricity prices
While many Member States have already put in place measures to mitigate the impact of rising electricity prices on households and businesses, the Commission considers that “many possibilities of the legal framework, including exemptions for households, are not yet fully exploited”.
Among the new measures envisaged at national level, the preliminary draft mentions the possibility for Member States to intervene directly in the functioning of the wholesale electricity markets in two different ways: - by financially compensating fossil fuel electricity producers for part of their extraordinarily high fuel costs so that they reduce their wholesale market offer price; - by directly capping the wholesale market price of electricity by setting a reference level and compensating the difference with the bid price.
Member States could also, according to the Commission, set up an ‘aggregator model’ whereby an entity would purchase electricity on favourable commercial terms and make it available to certain categories of consumers at a price below the market one, passing on the benefits to consumers.
Other options considered would be to set a regulatory ceiling on the maximum price that certain electricity generators can charge.
Detailing the advantages and disadvantages of each option, the text states that “there is no single, easy answer to tackle the high electricity prices given the diversity of situations among Member States”.
Some options are only suitable for specific national contexts, says the Commission, while others would require EU legislation and/or a common approach at EU level to be effective and not to undermine the internal market and security of supply.
Capping the price of gas
Regarding gas prices, the draft stresses that “capping or modulating gas prices through regulatory means is an option that may be considered”.
It adds, however, that this solution “should be considered as a last resort, as it entails some drawbacks in terms of security of supply of gas flows”.
A Task Force for common gas purchases
The Commission is also considering setting up a working group on common gas purchases at EU level, inspired by the experience gained during the Covid-19 pandemic.
The aim of the unit would be to facilitate and strengthen the EU’s international contacts with liquefied natural gas (LNG) and gas suppliers, pooling European demand to ensure cheap imports before the next winter. In this way, the Commission intends to establish long-term partnerships for renewable gas, which would also lay the foundations for future hydrogen imports.
The Task Force would be supported by Member State representatives in a steering board and a joint negotiating team led by the Commission would conduct discussions with gas suppliers.
In addition, the EU institution intends to present a proposal for a regulation to strengthen the EU’s gas storage capacity before next winter. According to the provisional version of the text previously detailed in our columns (see EUROPE 12915/5), Member States would be obliged to ensure that the storage facilities located on their territory are filled to at least 90% of their capacity by 1 November of each year.
Next steps
In May, the Commission will present the final version of its REPowerEU plan to end the EU’s dependence on Russian fossil fuels as soon as possible, as requested by the EU27 at the Versailles summit (see EUROPE 12909/1).
According to the draft communication, the Commission is also ready to propose an EU-wide energy saving plan and will assess options for optimising the design of the electricity market by May.
See the draft communication: https://aeur.eu/f/w8 (Original version in French by Damien Genicot)