Brussels is working on emergency measures to curb soaring household energy bills following Russia’s invasion of Ukraine.
Ursula von der Leyen, European Commission president, promised to bring forward ideas for possible controls on energy prices and methods of damping the effect of surging gas prices on electricity costs, in an EU summit in Versailles where leaders agreed to drastically reduce dependence on imported Russian oil and gas.
“By the end of this month the commission will present options to limit the contagion effect of the rise of gas prices to electricity prices,” she said, adding that the commission was also looking at how to allow state aid to go to struggling businesses.
Member states including France, Italy, Greece, Spain, Belgium and Romania favour ways to limit the link between gas and electricity charges given the recent spike in prices. Other capitals are reluctant to back heavy intervention that would disrupt EU energy markets.
Italy, Spain, Belgium and some others also want the ability to cap prices but face opposition.
EU leaders met for an informal summit in Versailles hosted by Emmanuel Macron, the president of France who holds the EU’s rotating presidency, to discuss the economic and defence response to the war in Ukraine.
They agreed to “phase out our dependency on Russian gas, oil and coal imports as soon as possible” by increasing imports of LNG from other markets, developing a European hydrogen market, improving energy efficiency and accelerating investments in renewable energy.
Von der Leyen said a plan would be presented by mid-May to phase out dependence on Russian energy by 2027, although member states differ on whether this is feasible.
She said it was “do able” to cut imports from Russia by two-thirds by the end of this year, as outlined in a commission plan this week. It also included the ability to subsidise consumer bills through a windfall tax on utilities, which are expected to make €200bn in extra profit this year.
The EU’s energy pricing system operates on a “pay as you clear” model in which wholesale electricity costs reflect the price of the last unit of energy bought via auctions held in member states. Generally gas is the fuel that is needed to make sure enough energy is supplied to meet demand and therefore drives the price, even in countries such as France where cheaper nuclear power provides about 70 per cent of electricity.
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This week Bruno Le Maire, finance minister of France, said the idea that carbon-free electricity prices should still depend on fossil fuel prices must change. “The more gas prices rise, the more this reality is obvious to everyone,” he added.
Mario Draghi, Italy’s prime minister, said after the summit: “Today there is only one price, so electricity produced at a very low cost — like that from renewable sources — reaches the consumer at the same price as that produced from gas . . . This is the main cause of rising electricity bills.”
EU leaders also backed steps to refill gas storage capacity as their attention turns to the risk of disruptions in Russian supplies ahead of next winter. The commission will propose that underground gas storage sites be filled to 90 per cent capacity by October each year.
Additional reporting by Andy Bounds in Brussels, Eleni Varvitsioti in Athens and Amy Kazmin in Rome