The European Comission presented this Wednesday a package with different ideas to reform the energy market, which will include “limit the prices of electricity and gas”. Finally, has decided to let the European heads of state decide at its summit on Thursday and Friday if this option must be specified in some other way.
In a document published this Wednesday, he has presented five options to try to reduce energy prices in the European Union in the short term and temporarily, while finalizing a review of the long-term electricity market that it hopes to have ready by April.
The Community Executive proposes put a cap on the price of gas in the wholesale marketoffset production costs of companies that generate electricity with fossil fuels, redirect “heavenly profits” to consumerscreate an aggregator that guarantees a low price to vulnerable consumers and set a maximum price for companies operating in the wholesale market.
This measure is completed with the possibility of creating an aggregator that guarantee a low price to vulnerable consumers or set a maximum price for companies operating in the wholesale market.
The Commission has also proposed oblige Member States to have their gas stores at least 80% full ahead of next winter and a mechanism to be able to withdraw control of deposits from companies from third countries, such as Russia’s Gazprom, if behaviors that threaten security of supply are detected.
These proposals were advanced this Tuesday at a press conference by the vice president of the Community Executive Maros Sefcovic, who also warned that the document it will be the basis for leaders to discuss the content and choose which options to move forward on.
In the press conference together with Sefcovic, the French Secretary of State for European Affairs and current president of the EU, Clément Beaune, explained that reducing dependence “undoubtedly generates more consensus” than the idea of a market reform to develop “price control tools”.
Taxing “excess” profits to help consumers
Specifically, the proposal proposes, among the alternatives to limit prices, assigning economic compensation to electricity generating companies for the high prices of fossil fuels, so that they can cover the difference between the generation costs and the reference prices. .
It also proposes that the national authorities can establish a tax on the “excessive” profits of electricity companieswhich derive from the way in which the wholesale electricity market is configured.
In this frame the profits obtained would be used to grant aid to consumers. A variant of this proposal would consist of establishing a maximum price for certain generation technologies.
Brussels also proposes to grant direct aid to consumers through subsidies as well as that certain entities sell electricity below market prices for certain consumers, such as the most vulnerable.
The joint negotiations of the EU with suppliers from third countries is another of the elements that Brussels raises in its communication, as part of a joint strategy to make purchases with international partners of liquefied natural gas, natural gas through gas pipelines and hydrogen.
Division among countries on response to price escalation
In this context, it will not be easy for the Heads of State and Government to reach a common position, since there are still deep divisions between countries on the response that the bloc must give to the rise in energy prices, whose main factor is the high cost of gas.
Spain, along with Portugal, Greece, France or Italy, are part of the group of countries that claim a far-reaching reform of the European electricity system.
The southern front, on the other hand, runs into the reticence of northern partners such as Germany and, above all, the Netherlands.
Diplomatic sources argue that the measures defended by Spain, especially limiting the price of electricity in the wholesale market, are “fantasies” that would not help solve the current problems or reduce the bloc’s dependence on fossil fuels from Russia.
The German Government warns of the cost of putting a cap on energy prices
The German Ministry of Economy has indicated this Wednesday that the proposal to put a cap on the rise in energy prices is “one of the options that are being discussed” in the European framework, but has warned that it is necessary to take into account its cost.
According to the spokesman for the Ministry, Robert Säverin, “ultimately it is a subsidy and that costs money,” he argued, during a press conference in Berlin, so it is necessary “to look at how much money there is and what the effect would be” to the market, which is also “part of the debate”.
For his part, the government spokesman, Steffen Hebestreit, referred to the discussion that the energy issue will be debated “in depth” this Thursday in Brussels. “It’s a complicated matter. You have to take into account market forces and how they will react, because they don’t always do as we would like,” he stressed.
Till the date, the German government has been reluctant to adopt community measures to regulate price increaseswhile trying against the clock to reduce its energy dependence on Russia.
Government meeting with the oil sector
Meanwhile in Spainthe Vice President of the Government and Minister for the Ecological Transition and the Demographic Challenge, Teresa Ribera, and the Minister for Finance and Public Administration, Maria Jesús Montero, met this Tuesday afternoon with representatives of the main companies and associations of the oil sector. The meeting was held within the process of consultations with the economic sectors that the Executive undertakes to prepare the National Plan for Response to the Impact of the War.
In addition to the two government representatives, Maarten Wetselaar, CEO of Cepsa; Josu Jon Imaz, CEO of Repsol; Andrés Guevara de la Vega, president of BP Spain; José Antonio Carrillo, president of the AOP, and José Mª Gordo, president of UPI.
During the meeting, the executives of the evolution of the negotiations that remain at European level to find solutions to the current energy price crisis, with a view to European Council of the next few days. The evolution of petroleum products and their impact on consumers, the transport sector and the Spanish economy in general have also been addressed.
George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.