European Commission announces changes in the energy market

by Jakub Plebański

20 September 2022

In the light of the energy crisis caused by Russia's manipulation of fuel and commodity supplies, the European Commission has proposed measures to protect consumers against radical hikes in energy prices and to stabilise the market situation.

Obligation to reduce electricity consumption

The first measure included in the EC's package is the obligation to reduce electricity consumption by at least 5 per cent during peak hours. At the same time, Member States will have to indicate at least 10 per cent of the hours of each month where prices are expected to be the highest and reduce demand during those hours. The European Commission has also proposed that Member States strive to lower general electricity demand by at least 10 per cent by 31 March 2023.

Cap on revenues of power producers

It is also essential to have a plan for capping revenues to be earned by power producers. According to the EC's proposal, said cap should be 180 euros per MWh. According to the initial proposals, the above-mentioned cap should refer to the so-called infra-marginal producers – who produce energy using technologies that, according to the European Commission, allow generating energy relatively cheaply. Among these technologies, the European Commission mentioned renewables, nuclear energy and lignite. As of now, no details are known as to how specific types of installations would be qualified as "infra-marginal technologies".

Solidarity contribution

The last of the measures announced by the European Commission includes a solidarity contribution that will be collected on the profit surplus of companies from the following sectors: oil, gas, coal and refineries that are not subject to the capping of the infra-marginal revenues. According to the assumptions, said levy would be collected by the Member States and channelled to energy consumers most affected by the crisis – especially private households and enterprises from energy-intensive sectors.

The European Commission does not rule out an even further-reaching intervention in the energy market including capping energy prices. Such a far-reaching intervention is needed to mitigate the effect of rising energy prices, to help consumers and to preserve the competitiveness of European economies.

For more information, feel free to contact our experts.