Political approval of the proposals of the European Commission to intervene in the electricity market

The European Commission will present a formal proposal for this intervention next Tuesday. Among other things, it remains to be defined at what price the kilowatts not generated with gas will be limited. The EU countries accept the five lines of action proposed by the Commissioner for Energy. The 27 Member States of the European Union today gave a nuanced approval to the five-point proposal that the European Commission presented on Wednesday. The next step will be taken by the Commission itself, predictably on Tuesday, when it converts that guide into a formal proposal. Energy Commissioner Kadri Simson managed to get ministers to accept all five points.1. There will be a cap on Russian gas, only Russian. For now. Simson explained that “a cap on everything, including liquefied gas, could jeopardize supply because there is fierce competition in the market for liquefied natural gas.” The commissioner will travel in the next few days to Algeria to try to get Algiers to increase the supply, to Spain and to Italy. It would only be for Russian gas that arrives by pipeline. The risk is that Russian President Vladimir Putin completely closes the tap, but Brussels estimates that after importing Russian gas from 40% to 9% and having reserves close to 85% of its capacity, the European Union can afford that risk. What the gas cap will be, how it will be set and how it will be applied is still unknown. The Czech presidency recognized that it is “the most complex case, we have to analyze the impact, but most countries consider that it is necessary”. The “for now” at the beginning of the paragraph is due to the fact that the ministers also asked the European Commission to make a report on the effect that limiting the price of all the gas that Europe imports would have. 2. There will be a cap on the price of electricity not generated with gas. The amount is yet to be decided, but the European Commission wants electricity generation plants that do not use gas (renewable, nuclear, hydroelectric) not to charge more than 200 euros per MWh. It is a figure that multiplies by four or five what was usual before the pandemic and that for some governments, such as the Belgian, is exaggerated. It could be revised downwards but it doesn’t seem to bother many executives. 3. There will be a tax on electricity companies, but don’t call it a tax but a contribution. The modalities of its design and application are also to be specified, but the political agreement is firm. The national treasuries will collect it. Your servant is allowed to remind the patient reader that in the Energy Council, which has approved it unanimously, environmentalist, liberal, socialist, conservative and mid-pensionist ministers sit.4. There will be a mandatory objective for the entire European Union to reduce electricity consumption, focused on peak hours to reduce gas-based generation as much as possible, which is at those times when it is most necessary. In the original proposal of the European Commission, this savings target is 5%. Can be modified. What comes out next week will be mandatory, but each government will be free to impose the measures it deems appropriate to achieve this reduction in consumption.5. There is also an agreement to prevent companies from not having liquidity to operate in the electricity futures markets. For this, the European institutions with the capacity to do so (European Central Bank) will be asked to prepare lines of credit to support companies with a lack of liquidity. Until now several governments (the German, the Austrian, the Finnish or the Swedish) have had to rescue them with their own means. The proposal of the European Commission must be prepared next Tuesday and will be explained by the president Úrsula Von der Leyen at first time Wednesday during his speech at the debate on the state of the European Union. Another extraordinary meeting of energy ministers, to be held before the end of the month, must approve them.