EU to propose crisis measures to tackle soaring energy prices

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The European Union will propose measures to cap revenues from low-cost electricity generators and force fossil fuel firms to share the profits they make from soaring energy prices, European Commission President Ursula von der Leyen said on Wednesday.

European governments have ploughed hundreds of billions of euros into tax cuts, handouts and subsidies to try to contain an energy crisis, fueled by Russia’s invasion of Ukraine, that is driving up inflation, forcing industries to shut production and hiking bills ahead of winter.

“In these times it is wrong to receive extraordinary record revenues and profits benefiting from war and on the back of our consumers. In these times, profits must be shared and channeled to those who need it most,” von der Leyen told the European Parliament in Strasbourg.

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She said the bloc was also discussing energy price caps and working to establish a “more representative benchmark” price for gas than the Dutch Title Transfer Facility (TTF), where gas prices have rocketed higher.

A draft of the Commission proposals, seen by Reuters, would skim off excess revenues from Europe's non-gas fueled power plants and have governments spend the cash on helping businesses and retail consumers with their bills.

Wind and solar farms and nuclear plants would face a cap of 180 euros ($180) per megawatt hour (MWh) on the revenue they receive for generating electricity, according to the draft, which could still change before it is due to be published on Wednesday afternoon.

That would cap generators’ revenues at less than half of current market prices. Germany’s front-year electricity price hit a record high of more than 1,000 euros/MWh last month and was trading at just below 500 euros/MWh on Wednesday.

Fossil fuel firms would also face a windfall levy to claw back profit from soaring oil and gas prices stoked by Russia slashing gas deliveries in the wake of its invasion of Ukraine.

Oil, gas, coal and refining firms would be required to contribute 33 percent of their taxable surplus profits from fiscal year 2022, the draft said.

Von der Leyen said the Commission will also propose measures for EU countries to cut overall electricity use, in a bid to save fuel.

EU countries’ gas storage caverns are now 84 percent full - a healthy pre-winter level - but analysts say Europe will still need deep cuts in fuel use over winter to avoid shortages.

The Commission has backed away from an initial plan to cap Russian gas prices, however, and EU countries are divided over whether broader price caps would help or harm Europe’s efforts to secure winter energy supplies.

Brussels is also working on plans to amend collateral requirements in energy markets to help companies facing a liquidity squeeze.

Separately, Von der Leyen said the EU was planning a deeper overhaul of its electricity market to decouple power prices from the soaring cost of gas.

EU countries will have to negotiate the Commission’s proposals and agree on final laws. With contentious gas price caps off the table - at least, for now - diplomats from some states were optimistic that deals could be struck at a meeting of EU energy ministers on September 30.

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