EU Commission President Ursula von de Leyen surprised member states on Wednesday, September 7th, with a public statement on the commission’s plans to address skyrocketing electricity prices just two days ahead of a meeting of member states on the topic.
Energy ministers from member states are set to meet on Friday; they had not anticipated a public proposal from the commission ahead of the meeting, Politico reports. They were also taken off-guard by some of the details in von der Leyen’s five proposals.
Her first proposal was a reduction in energy demand, to avoid having to use natural gas to generate electricity.
“Whatever we do, one thing is for sure: We have to save electricity, but we have to save it in a smart way. If you look at the costs of electricity, there are peak demands. And this is what is expensive, because, in these peak demands, the expensive gas comes into the market,” she said.
Europe’s electricity prices are set by the most expensive generation source, which in the EU energy mix is natural gas. The EU had already allowed Spain and Portugal to decouple the price of gas from electricity last April, and some countries were hoping to unhook the entire block from the regulation, but the commission favours a different tactic.
Regarding cheaper electricity sources that financially benefit from prices hinging on gas, von de Leyen proposed “a cap on the revenues of companies that are producing electricity with low costs.”
“The low-carbon energy sources are making, in these times—because they have low costs but they have high prices on the market—enormous revenues,” she said.
The commission hopes a revenue cap would redirect the enormous earnings of “low-carbon energy sources like, for example, the renewables” to consumer benefits via government subsidies to citizens.
“We will propose to re-channel these unexpected profits to the Member States so that the Member States can support the vulnerable households and vulnerable companies,” she said.
“The same goes, of course, for the unexpected profits of fossil fuel companies,” she said, introducing the third proposal, “a solidarity contribution for fossil fuel companies.”
The fourth point focused on the utility companies that buy energy and deliver it to customers. Von der Leyen proposed subsidies to ensure their viability in a hectic, expensive market.
“We will help to facilitate the liquidity support by Member States for energy companies. We will update our temporary framework and thus enable state guarantees to be delivered rapidly,” she stated.
The fifth proposal is one of the most controversial: a cap on Russian gas prices. Russian President Vladimir Putin has already threatened to cut off Europe from its gas if it attempted to limit the price.
Politico reports that countries were blindsided by von der Leyen’s statements, as Friday’s meeting was expected to be the first discussion of block-wide proposals to lower energy prices and assist businesses and citizens.
Member states’ opinions are still widely divergent on certain ideas, such as making energy rationing mandatory.
According to Politico, von der Leyen issued her statement while national experts were discussing technical details ahead of Friday’s summit, leaving national diplomats miffed.
By preempting Friday’s meeting, von der Leyen is perhaps conveying the commission’s intention to control the debate and speed up the process of reaching an agreement on measures to face the approaching winter.
