Posted Sep 29, 2022, 5:11 PM
Two weeks after their last meeting, the European energy ministers are meeting again this Friday in Brussels to discuss a new version of the Commission’s plan intended to alleviate the exponential rise in energy prices on the Old continent.
The first version had been debated and the Commission had to specify its copy. “Overall, the main parameters of the plan have not changed,” said a senior official. The Commission has above all sought to provide more flexibility to the Member States in the application of the measures”.
Three of them should be adopted on Friday. First, a reduction in electricity consumption, which is mandatory during peak hours when demand is highest. Then, the capture of the rent of the producers of electricity at low production cost: a ceiling of 180 euros per megawatt hour will be applicable from 1er December to June 30. Any turnover earned beyond this limit will be recovered by the Member States.
Finally, the establishment of an exceptional “solidarity contribution” on the profits of oil companies for their European hydrocarbon production and refining activities. A minimum rate of 33% will apply to profits deemed excessive in 2022 (profits 20% higher than the average of the last four years).
Divergence on gas price cap
On these issues, Europe is united. But the Member States are still struggling over the very sensitive issue of gas price caps. In its proposals, the Commission persists and signs: only the price of Russian gas must be capped, to bring down prices at entry into Europe and reduce Russia’s income and therefore its ability to finance the war in Ukraine.
However, this solution did not receive the support of the Member States at the beginning of September. Will they have changed position on Friday? Fifteen of them, including France, Spain, Italy, Greece, Belgium and even Poland, propose, on the contrary, capping the price of all gas arriving in the Union – and not only Russian gas – and sent a letter to the Commission urging it to do so.
Waste of time: the Commission lists in its new proposal many obstacles to the implementation of such a measure, which it considers would increase gas consumption. Which, in diplomatic language, means its rejection. “It is a radical measure which presents a significant risk, considers a senior official, that of automatically leading to a shortage of supply. If we do this, would suppliers choose to continue selling at this capped price? And then you will also have to pay the price difference…”.
France hopes to convince Germany
France is advancing its arguments and hopes to convince Germany, the economic lung of Europe, which does not support this solution for the moment, fearing that it will cause a shortage. “The measures proposed by the Commission make it possible to finance part of the cost of the energy crisis, but they do not attack its origin, the explosion of the prices of gas and, in its wake, of electricity”, insists do we in the office of Agnès Pannier-Runacher, the Minister of Energy Transition.
Paris underlines that the measure could be introduced gradually, first on Russian gas, before negotiating more advantageous prices with other exporters by gas pipeline, Norway and Algeria in the lead.
In its proposals to lower the price of gas imported by pipeline, the EU recommends engaging in discussions with “trusted partners” to agree on a price reduction while preserving supply. And to lower the price of LNG, here again, the EU believes that it is necessary to negotiate with the exporting countries and set up joint purchases.
Another solution is on the table, to which the EU says it is “open”: it is a question of “capping the price of gas used for (production) of electricity at a level which contributes to lowering the price of electricity without causing an increase in gas consumption. A mechanism that has proven itself in Spain and Portugal, and that France, among others, wishes to extend to the continental level.
The Commission must propose, probably next Tuesday, an “action plan” to put in place the measures which will be decided on Friday.
