The European Commission has proposed this Wednesday to limit prices in the wholesale market of electricity as one of the possible options to stop the rise in electricity prices, for example with compensation to electricity operators or intervening directly to set a ceiling with reference prices.
This possibility is one of those that form the ‘menu‘ that Brussels will take to the summit of EU leaders this Thursday and Friday to “feed” the debate at Twenty-seven, said the economic vice president of the Community Executive, Valdis Dombrovskis, when informing at a press conference of the adoption of the document by the College of Commissioners.
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 generation costs and reference prices.
The idea of intervening to put a ceiling on maximum electricity prices, claimed by Spain and supported by southern countries such as Portugal and others such as Belgium, generates the greatest differences with other European governments, such as Germany or the Netherlands, which defend that there are mechanisms in the current system.
The proposal, points out the European Commission, would require strong regulation to ensure that the electricity generated above that threshold is produced in “reasonable” conditions since it will fix the economic compensation. In addition, it must ensure that those who produce energy below that price threshold do not benefit from this limit in order to obtain higher margins.
It also proposes that national authorities be able to set a levy for “excessive” profits of the electricity companies, through a regulatory intervention. Given the way in which the wholesale electricity market is configured, the Community Executive emphasizes that renewable generation technologies do not have costs similar to those that depend on fossil fuels and therefore obtain additional returns.
A variant of this proposal would consist in establishing a maximum price for certain electricity generation technologies linked to fossil fuels. The measure that would protect producers dependent on fossil fuels from fluctuations in international markets.
Through this proposal, electricity companies would be compensated for the prices of gas, oil or coal. An idea that foresees that lower costs of fossil fuels will lower electricity prices.
What’s more, the Community Executive considers the intervention of the gas market in the EU by setting a maximum price for its sale on the community market. A measure in which the price should be higher than the supplier’s costs but lower than the market.
Brussels also proposes granting direct aid to consumers through subsidies or coupons as well as certain entities selling electricity below market prices for certain consumers, such as the most vulnerable. These interventions in the electricity distribution segment they will require high budgetary resources for their execution.
Joint purchases
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 LNG, natural gas through gas pipelines and hydrogen.
Within this framework, the Community Executive has presented a legislative proposal that establishes the obligation for gas storage facilities in the EU to be at 80% of their capacity next November in order to ensure supply for the winter season, which which means lowering your expectations from the 90% minimum capacity initially planned.