Listen to the news

The European Commission is expected to present tomorrow, September 14, a proposal for a package of measures aimed at reducing soaring gas and electricity prices, which are causing record high inflation, hampering industry and drastically increasing household bills.

This reveals a draft of the Commission's upcoming proposals, cited by Reuters and BTA.

After the EC submits the proposals to the European Union, the governments can discuss the details of the package, and possibly approve it at the meeting of the energy ministers of the Community, scheduled for September 30.

Tax on the revenue of power plants that do not operate on gas

The draft proposal includes a reduction in the revenue of electricity producers who do not use gas to generate it. It will also require member state governments to direct funds to mitigate the consequences for citizens and businesses of rising energy bills.

MEPs will discuss measures in response to high energy prices in the EU

In the EU, gas plants often set the price of electricity.

Non-gas-fired power plants sell their electricity at the resulting high prices - even though they don't have to pay the huge gas costs.

Brussels wants to cut all "excess" revenues of wind, solar, nuclear and biomass plants, according to the proposals, which could be changed before their final adoption. 

The measure will apply a price cap on the revenue received from the sale of megawatt hours of electricity on the market.

The revenue cap will be applied after the electricity transactions are settled, so it will not directly affect the prices of the European exchange-traded electricity, the draft also says.

The exception will be the income from state subsidy schemes.

However, coal-fired plants will not fall under the price caps as their fuel costs have also risen sharply.

"Solidarity contribution" from fossil fuel surplus profits

Companies that have made huge profits from selling fossil fuels at record high prices will be obliged to contribute financially to help citizens and businesses hit by the high bills, the draft EC proposals also foresee.

According to them, member states will introduce a temporary "solidarity contribution" for oil, gas, coal and refining companies established in the EU.

They (firms) will have to make contributions amounting to one-third of their "taxable excess profits realized in fiscal year 2022". 

Some countries, including Italy, have already introduced a tax on the excess profits of energy companies.

Brussels envisages the introduction of a similar minimum rate for all EU countries.

Reduction of electricity consumption

The proposal also includes imposing a mandatory target for countries to reduce their electricity consumption in the coming winter to ensure Europe has enough gas to see it through the colder months.

During periods of "peak" electricity prices, the EU will require countries to limit electricity consumption by a certain percentage, the draft also says, which also includes voluntary targets to reduce electricity consumption. 

Providing emergency liquidity for energy companies

EU countries have also tasked Brussels with creating "emergency liquidity tools" to help energy companies facing rising collateral needs. 

Utility companies pre-sell energy to secure a certain price before the energy is produced, then must provide a cash deposit in case they default.

However, with rising electricity prices, companies have to set aside larger amounts for deposits, which affects their liquidity.

EU officials said plans for emergency liquidity support were still being drawn up and would likely be published later.

A document published by the EC last week notes some options that Brussels policymakers are exploring: "Accepting a wider range of assets as collateral for margining purposes (financial guarantee), facilitating the transformation of collateral, bank guarantees and ( ...) inclusion of government guarantee schemes to support such liquidity mechanisms".

No cap on the price of gas

The proposals do not include a ceiling on the price of gas.

Some EU countries have asked Brussels to propose a similar measure, but have not reached a consensus on whether it should apply to all imported gas, just piped gas or to the wholesale trade of blue fuel.

Germany, the Netherlands and Denmark oppose a common cap on gas prices, warning that it could make it harder for countries to attract competitively priced supplies to global markets and threaten Europe's energy security in winter.

European Commission

energy crisis