The Heads of State or Government of the EU Member States have agreed to make common gas purchases on a voluntary basis in order to strengthen their bargaining power and thus try to obtain better prices from suppliers. The discussion on Friday 25 March lasted more than nine hours due to divisions over the issue of energy price caps.
“We looked at various options to mitigate the impact of high energy prices on consumers and businesses, such as income supports or State aid, vouchers, tax reductions, price caps, price modulation, contracts for differences, etc.”, explained the President of the European Commission, Ursula von der Leyen, at the end of the European Council.
As expected, the adopted conclusions state that Member States and the European Commission “will urgently work together on the voluntary common purchase of gas, LNG (liquefied natural gas) and hydrogen” through a “common purchases platform”. This will allow the European Commission to negotiate with gas suppliers on behalf of those Member States that wish to do so in preparation for next winter.
One difference compared to the draft conclusions (see EUROPE 12918/11): the text now specifies that this platform will also be open to the countries of the Western Balkans and the three associated Eastern partners (Ukraine, Georgia, Moldova).
The idea of common gas purchases was included in a European Commission Communication unveiled on Wednesday 23 March, intended to present the advantages and disadvantages of various options to mitigate the impact of soaring energy prices on households and businesses (see EUROPE 12917/7).
Among these options, the Communication mentioned the possibility of capping or modulating gas prices by regulatory means, while specifying that this was to be considered “as a last resort”.
No decision on price caps
This idea is mainly supported by southern European Member States, led by Spain and Portugal, while other countries such as the Netherlands, Germany, Sweden and Denmark are opposed at this stage for fear of disrupting the functioning of the market.
According to a senior European official, it was “technically impossible” for the Heads of State or Government to take a decision on the subject of energy price caps, given the very short time (2 days) between the presentation of the European Commission’s Communication and the discussion among leaders and given the technical complexity of the subject.
This possibility is nevertheless specifically mentioned in the conclusions, a victory for the countries of the South.
The leaders agreed to ask the EU Council and the European Commission: to reach out to the energy stakeholders, and to discuss, if and how, the short-term options as presented by the Commission”, including “price caps”, would help in “reducing the gas price and addressing its contagion effect on electricity markets”.
This discussion must be done “taking into account national circumstances”, the text goes on to say.
National circumstances and the “energy mix” of Member States will also have to be taken into account by the European Commission in its REPowerEU plan due on 18 May (according to the institution’s draft agenda - see EUROPE 12918/35). This is a clarification compared to the draft conclusions.
The European Council further invites the European Commission to “submit proposals that effectively address the problem of excessive electricity prices while preserving the integrity of the single market [...], security of supply and avoiding disproportionate budgetary costs”.
The Iberian exception
Despite sometimes heated discussions that reportedly led Spanish Prime Minister Pedro Sánchez to temporarily leave the meeting room, Mr Sánchez and his Portuguese counterpart, António Costa, expressed their satisfaction at the recognition of what they called the “Iberian exception” in the European energy landscape, at a joint press conference after the summit. However, this exception is not specifically mentioned in the conclusions.
The two leaders described the decisions taken that will allow their countries to act on gas prices. Referring to the current “contamination” of electricity prices by gas prices, Mr Costa expressed his determination to ensure that the increase in gas prices does not exceed a certain threshold, which would have consequences for electricity prices for families and businesses. Mr Sánchez then went on to say that a reference price for gas will be established, leading to a drop in prices.
Underlining the leadership of their two countries, joined by Italy, Greece, Slovakia, Belgium, Romania, Bulgaria, Slovenia and Portugal, Mr Sánchez described the energy specificity of the Iberian Peninsula: a high level of renewable energy penetration (60% in Portugal and 45% in Spain) and an interconnection of the peninsula with the rest of the EU of less than 3%, whereas the target was 10% in 2020 and 15% in 2030.
As early as next week, both countries will send their specific measures to the European Commission, which has committed to respond to them as a matter of urgency. On Tuesday 29 March, the Spanish government will present a national plan of measures to combat soaring energy prices.
In the European Council conclusions, the European Commission states that it is ready to “urgently assess the compatibility of emergency temporary measures in the electricity market notified by the Member States”.
This assessment will have to ensure that the measures “do not affect trading conditions to an extent contrary to the common interest”, while taking into account “the temporary nature of the measures and the level of electricity interconnectivity with the single market for electricity”.
“We would have preferred a European solution”, admitted Mr Sánchez, convinced that this is “still required” and even desirable. He praised the agreement on common gas purchases and reiterated his call for a thorough reform of the energy market so that prices reflect “the new reality”, including the extent of renewable energy.
In parallel to the summit, the European Commission and the US agreed on a significant increase in American LNG deliveries to the EU (see EUROPE 12919/1).
See the conclusions: https://aeur.eu/f/z4 (Original version in French by Damien Genicot with the editors)