Member States’ ambassadors to the European Union (Coreper) discussed the European Commission’s proposed emergency measures to tackle soaring energy prices on Wednesday 14 September, the same day the measures were presented.
There is no time to lose if the Member States want to reach an agreement on 30 September, the date of the next meeting of the 27 European energy ministers (see EUROPE 13020/16).
According to our information, the ambassadors’ discussion revealed the persistence of divisions already expressed at the last meeting of ministers on Friday 9 September, following the official presentation of the emergency measures (see EUROPE 13018/1).
For example, some delegations criticised the proposal to set a binding target for Member States to reduce their gross electricity consumption by at least 5% during peak hours (when electricity demand is highest), preferring an indicative target.
Which procedure for the “solidarity contribution?”
They are also said to be divided on the relevant legal basis for the introduction of a “temporary solidarity contribution” on excess profits generated by companies in the oil, gas, coal and refining sector (see EUROPE 13021/1).
For some, this is a fiscal measure and should therefore be dealt with according to the voting rules on this matter, i.e. unanimity, rather than being subject to the qualified majority rule.
Similar to a tax on the super-profits of fossil fuel companies, this contribution would be levied by Member States on profits in 2022 that exceed the average profits of the previous three years by more than 20%, at a rate of at least 33%.
This is a minimum rate which Member States could decide to set at a higher level, if they so wish. They would also have the possibility to combine this contribution with similar existing national measures and/or to apply it to a wider set of companies, as long as this choice remains compatible with the Commission’s proposal for a regulation.
This provides for the solidarity contribution to be applicable for one year from the entry into force of the Regulation. The Commission would also review the measure by 15 October 2023.
Capping of inframarginal income
Another measure that could be a source of friction is to cap the revenues of electricity producers with a cost below the wholesale market price (‘inframarginal generators’) at €180/MWh, i.e. the majority of renewable energies, nuclear energy, lignite, crude oil and other oil products.
Designed to run until 31 March 2023, the instrument aims to allow Member States to capture the difference between the cap and the actual income earned by inframarginal generators and then redistribute it to households and businesses in difficulty.
The revenues collected by governments will logically vary from one Member State to another, as this will depend on the energy mix of each one, which could pose a problem during negotiations between delegations.
In this respect, the proposed regulation provides for the possibility of sharing surplus revenues between Member States that trade electricity: the producer State could then share part of the inframarginal revenues it has collected with end-users in the Member State where electricity production is low.
The Commission therefore encourages Member States “to conclude bilateral solidarity agreements” in order to achieve this sharing. Such agreements should be concluded no later than the 1 December 2022 when a Member State’s net electricity imports are equal to or greater than 100% of the country that is its main exporter.
In addition to this problem of revenue distribution, the risk of slowing down investment in renewable energy is also said to be a concern for some Member States.
A risk that Timmermans does not believe in: “I don’t think that investment in renewables is threatened by this situation, because it is so profitable to invest in renewables at the moment”.
For him, renewable energy producers are currently making so much money, “far beyond what they ever dreamed of doing before they set up their investment plan”, that there is no real danger that the cap will reduce investment capacity in the renewable energy sector.
“The level (of €180/MWh) still gives them a profit margin and preserves their incentive to invest”, he said.
In order to “maintain a necessary safety margin”, the level of the cap “has been set well above the average price estimates of market participants for peak hours, prior to the Russian invasion of Ukraine”, a Commission press release also states.
Any other proposals on the table before 30 September?
During the Ambassadors’ meeting, several Member States were also reported to have expressed disappointment at the lack of a proposal for a gas price cap, while others reportedly welcomed the Commission’s approach of deepening discussions with gas supply countries as a first step.
This cap is one of the measures that could be presented in the coming weeks or months, along with the introduction of a more representative benchmark than the FTT and a proposal to alleviate liquidity problems in the electricity futures markets.
The Commission is also planning a thorough reform of the electricity market for the beginning of next year. (Original version in French by Damien Genicot)