EU proposes energy market reforms to avoid price spikes

The European Commission on Tuesday proposed changes to Europe’s electricity market rules.

The aim of the change is to expand the use of long-term contracts to protect consumers from sharp price spikes and make energy bills “less dependent on volatile fossil fuel prices”.

Last year, energy prices in the bloc soared amid dwindling supplies of oil and gas from Russia.

EU Energy Commissioner Kadri Simson said: “Tight global supply and Russian manipulation of our energy markets have left many consumers facing massive increases in their energy bills.”

Simon said the bloc would announce further steps in the joint purchase of gas on Wednesday. She added that the bloc is preparing a proposal to cut gas use by 15% during the winter months.

What are the proposals?

The Commission wants to guarantee long-term electricity contracts that provide consumers with energy at a stable price.

EU member states must guarantee a minimum energy price to generators for all new investments that require subsidies. Revenues above a set threshold must be funneled back to consumers, according to a press release.

These revenues would not apply to fossil fuel powered generators.

The proposal provides for public guarantees that aim to make viable long-term contracts signed between energy producers and consumers.

The commission said that it intends to reinforce the rights of end users, giving them the right to choose between suppliers that carry out fixed and dynamic price contracts, as well as the possibility of acquiring more than one supply contract.

Proposals include measures to manage variable demand, with more expensive sources such as gas added to the mix at times of higher demand. The commission hopes that this measure will encourage investments in renewable energies.

EU Commission Vice-President Frans Timmermans said of the measure that “renewable energy is our ticket to energy sovereignty and the end of our dependence on fossil fuels”.

EU to ‘decouple’ gas and energy prices

Currently, energy prices in Europe are set by the final generator needed to meet demand. As the final generator is usually a gas plant, spikes in gas prices can have a substantial effect on overall energy prices.

Last year, the bloc presented the reforms as a way of “decoupling” gas and energy prices.

Some member states, such as Spain and France, have called for broader energy market reforms.

Countries including Germany, Denmark and Latvia have warned against sweeping reforms, arguing they could scare off investors.

EU member states and the bloc’s parliament must negotiate and approve the final changes.

sdi/ar (Reuters, dpa, AFP)