Electricity: EU ready to intervene to stem soaring prices – 08/29/2022 at 19:00

Electricity: EU ready to intervene to stem soaring prices - 08/29/2022 at 19:00
The EU has announced an emergency intervention in the electricity market to limit Europeans' bills, and is working on structural reform to stem soaring prices (AFP / John MACDOUGALL)

The EU has announced an emergency intervention in the electricity market to limit Europeans’ bills, and is working on structural reform to stem soaring prices (AFP / John MACDOUGALL)

The EU announced on Monday that it was preparing “an emergency intervention” in the electricity market to limit Europeans’ bills, and is working on “a structural reform” in order to stem the rise in prices, under pressure from the Member States.

Such a reform of the common electricity market, demanded for a long time by France but which divided the Twenty-Seven, will be on the menu on September 9 in Brussels at a meeting of EU energy ministers, which should also consider the proposal by several States of a price cap.

“The soaring electricity prices clearly show the limits of the current functioning of the market. This had been designed in a very different context”, admitted Ursula von der Leyen, the President of the European Commission, during a conference in Bled (Slovenia).

“That is why we are currently working on emergency intervention and structural reform of the market”, where electricity prices are closely correlated to gas prices, she added, without further ado. details.

The September 9 date was announced on Monday by Czech Industry Minister Jozef Sikela, whose country holds the rotating EU presidency. “We need to fix the energy market. The solution at EU level is by far the best,” he tweeted.

Speaking alongside him at a press conference in Prague, German Chancellor Olaf Scholz also called on member states to agree “rapidly” and in a “coordinated manner” on a reform. The current system “cannot be described as working normally if it leads to such high electricity prices”, he criticized.

But as a reform would take time, Prague immediately proposes “a cap on the price of gas intended to produce electricity”. “It would be an effective and less expensive solution which should reduce prices” for consumers, argued Mr Sikela.

A proposal supported by Belgium: “Today, electricity is produced at a much lower price than the price at which electricity and gas are sold”, which justifies “acting at the source, via a price freeze, a cap at European level,” Belgian Energy Minister Tinne Van der Straeten said on Sunday.

Only two member states, Spain and Portugal, have so far had the green light from Brussels to deviate from EU rules by imposing a cap on energy prices, due to their weak connections to European networks.

– “A madness”-

Calls to change the common electricity market grow as, after six months of war in Ukraine, energy prices soar to stratospheric levels, raising fears of a winter cost of living explosion next.

On the European market, it is the cost price of the last source of electricity mobilized to meet demand, often gas-fired power stations, which determines the price imposed on all operators on the continent. This price soared in concert with the surge in gas prices linked to the drastic drop in Russian gas deliveries to Europe.

On Sunday, Austrian Chancellor Karl Nehammer called on the EU to “decouple the price of electricity from that of gas” to “stop this madness”.

This decoupling was demanded by Paris, which believes that French consumers are penalized, prevented from fully benefiting from the low costs of nuclear power by a mechanism deemed “obsolete”.

“I hope that we can go to the end of this dynamic and truly have an electricity market that is protected from elements of speculation (…) our countries today are victims of a price formula and assumptions which no longer correspond to reality,” French President Emmanuel Macron reaffirmed on Monday.

Paris, supported by Madrid, had put the subject on the table last fall when gas prices were already soaring, boosted by the post-Covid economic recovery.

But, in a joint declaration published in October 2021, nine Member States, including Germany, were then fiercely opposed to any reform of the electricity market, judging the current system effective in “contributing to innovation” and “facilitate the transition” to green energies.

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