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Thursday, May 19, 2022

EU Commission: Emergency measures against high energy prices

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Brussels (dpa) – Shortly before an EU summit in Brussels, the European Commission presented more concrete measures to lower energy prices in Europe.

The Brussels authority has proposed a law of mandatory gas reserves to ensure energy supply next winter. At the same time, he listed possible emergency measures, such as price caps, to protect consumers from sharp price increases. Joint gas purchases are also being considered. The heads of state and government of the EU countries will discuss this issue at their meeting on Thursday and Friday.

In Germany, too, the federal government is considering measures against high prices. On Wednesday night, the ruling SPD, Greens and FDP parties wanted to meet at the highest level to negotiate planned relief for citizens. In view of the war in Ukraine, gas prices, and with it electricity prices, have continued to rise. Difficulties in energy supply are also feared, as the EU and Germany in particular depend on Russian imports. According to official figures, gas storage facilities in the EU are only 26 percent full, in Germany they are almost 25 percent full, much less than in previous years.

Mandatory gas reserves

According to the Commission’s legislative proposal, EU countries must ensure that their gas reserves are 80 percent full before November 1 this year and 90 percent full before the deadline in the next years. This should secure gas supply and curb price fluctuations. In Germany there are already plans for similar measures that, according to the Ministry of Economy, should come into force in May.

EU countries and the Commission must check fill levels and intermediate levels throughout the year. Countries could financially compensate gas suppliers with state funds, for example, or offer tariff discounts to create incentives to store gas despite high prices. Since not all EU countries have gas storage facilities, there should also be a mechanism for burden sharing so that everyone can benefit from the higher levels.

Control of operators of gas storage facilities

The proposed law also gives EU countries greater influence over gas storage operators through licensing. This is to ensure that these do not jeopardize the power supply. If the operators lose their license, they have to sell shares or they can be expropriated. In Germany, Gazprom operates two gas storage facilities, including the country’s largest in Rehden, Lower Saxony. The Russian state-owned company was accused of intentionally underfilling its storage tanks this winter. The law now has to be negotiated and approved by the EU Parliament and the countries.

Limit for lower electricity prices

The EU Commission is considering additional national and EU-wide options to combat high electricity prices. So far these are non-binding and will be discussed at the EU summit. States could, for example, buy electricity on the market and make it available to customers who need it more cheaply. Countries could also set a fixed wholesale electricity price and financially compensate producers for this. A maximum price for gas could also be set across the EU, leading to lower electricity prices. The price of electricity is influenced by the price of gas through a price mechanism in the EU.

However, all these measures, the Commission believes, also have disadvantages that could affect supply, such as high costs for the state coffers and a distortion of the markets, so that suppliers sell their gas or electricity in other places where prices are better for them. In certain circumstances, EU laws would also have to be amended or new ones created. In addition, incentives for investments in renewable energy would be partially reduced, he said. Germany has so far rejected market interventions such as price caps.

Joint gas purchases

As an alternative to price caps, the EU Commission is proposing to buy gas together to gain a more favorable position on the market, similar to corona vaccines. With a better market position, the Brussels authority hopes for greater reach and lower prices. To this end, a Commission team, with the support of the Member States, could negotiate with suppliers the purchase of gas, liquefied natural gas (LNG) and, in future, also hydrogen.

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