European cacophony to intervene in the electricity market

The cap on the price of Russian gas is viewed in Germany with “scepticism” while Hungary and Slovakia simply reject itSharp tongues could say that the meeting of energy ministers of the 27 member states of the European Union that takes place this Friday looks like the army by Pancho Villa. It is not that, as usual, the governments face each other in blocs. It is practically impossible to find two who want the same thing. The president of the European Commission, Úrsula Von der Leyen, anticipated the leaks on Wednesday and published the document that the ministers have on the table today. The times are tough, especially for vulnerable households and businesses.But we shall overcome with our European strength – our unity and our solidarity.Here are the 5 measures that the @EU_Commission will discuss with EU countries at the Energy Ministers meeting on Friday ↓ pic .twitter.com/mtMYSVXrpl— Ursula von der Leyen (@vonderleyen) September 7, 2022 1. A cap on the price of Russian gas. If Putin accepts it well. But also. Brussels estimates that the European Union, with reserves above 85%, can now live without Russian gas. From being 40% of imports before the war, it is now 9%.2. Cap on the price of electricity not generated with gas. As the price formation system pays all electricity at the price of the most expensive, the owners of nuclear, renewable or hydroelectric plants are making gold with profit margins multiplied by four or five. They are the “benefits fallen from heaven.”3. Reduction of consumption. The European Commission understands that more sacrifices can be made. This Wednesday, for example, pointed to a reduction in electricity consumption of 5% in peak hours of more consumption. 4. Tax on extraordinary profits of electricity companies. Do not call it a tax, since the very liberal Directorate for Energy of the European Commission does not like the term. They prefer to call it contribution. Community sources explained this Wednesday that these benefits fell from the sky add up to more than 200,000 million euros so far this year while the governments have already spent 244,000 million to contain prices. 5. Liquidity measures, for example with lines of credit from the European Central Bank, to avoid the collapse of future electricity markets. Two points seem to have the approval of most governments. They are the last two and therefore they are the ones that could get ahead more easily. An indicative political decision would be made this Friday, which would give rise to the Commission to draw up a proposal on what that “contribution” of the energy companies would be like and to the European Central Bank to prepare lines of credit to maintain the liquidity of the futures markets. From there everything is anger. The Russian gas price cap is viewed in Germany with “scepticism” while Hungary and Slovakia simply reject it. The Hungarians are Russia’s only allies in European governments. The Slovaks depend exclusively on Russian gas that arrives through pipelines. If this cap is approved and Putin closes the tap, they will run out of gas. While those reject the cap on gas, others want to expand it. Poland and Italy lead that small group. That would limit not only what is paid for Russian gas but for everything else. The Norwegian government has already said that it is open to accepting a limit on its gas, but Washington, which is considerably increasing its gas shipments in methane tankers, has not opened its mouth. Poland has another idea that the Commission left out of the package: to suspend the carbon emissions market. That would make electricity generation somewhat cheaper but it would be a clear sign that the energy transition and the climate crisis are accessory battles, not essential. The second point, that of limiting what is paid for electricity generated without gas, also generates reluctance in some governments but they are not the expected ones. The Belgian Government was forceful in saying that it did not understand why the European Commission used an amount of 200 euros per MWh as the maximum limit. Those 200 euros are between four and five times higher than the average of what these plants charged (obtaining benefits) before covid. The third point, that of additional savings through national measures, is also rejected by many governments. They do not want Brussels to impose any percentage of savings, they want to have a free hand to make that decision at the national level. Of course, there will be few who do not point to “Europe” as the stepmother who forced them to approve these measures. The anger is not only about the five points launched by the Commission. Some governments, with the Spanish in that group, would like Brussels to have added the decoupling of gas prices from the formation of electricity prices, cutting the knot that makes everything pay at gas prices. They do not agree or how the package would be approved. The European Commission wants it to be done through the emergency system, for which only a reinforced majority vote would be necessary. Hungary wants it to be unanimously to be able to veto it.