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Skyrocketing gas and electricity bills risk creating economic and political chaos throughout the EU, and there is increasing pressure for the bloc to act.
The action is heating up in Brussels. EU ambassadors are meeting on Wednesday and energy ministers will be in the EU capital on Friday for an emergency summit.
But what does it all mean? What are the ministers expected to discuss? And what is achieved this week? Here’s a guide ahead of the crucial summit.
1. What is the problem?
Electricity prices have gone through the roof across the continent, driven largely by Russia weaponizing gas supplies to hit EU ally Ukraine.
Gas prices are closely linked to electricity prices in the EU, where the wholesale price of electricity is determined by the last power station needed to meet demand the next day. It has been very expensive gas recently – futures hit €238 per megawatt-hour on Tuesday, a more than eightfold increase compared to the same time last year.
The situation is exacerbated by high temperatures earlier in the summer that destroy Europe’s hydropower reservoir capacity. Maintenance problems have forced France to shut down 32 of its 56 nuclear reactors, eroding the country’s role as a historic exporter of electricity.
2. Why is it getting worse?
Energy prices have cooled somewhat after breaking records at the end of August, but the big concern is how the continent will fare in the winter heating season.
Russia’s Gazprom said on Friday it would halt gas supplies to Europe via the Nord Stream pipeline indefinitely.
The worry is that anything short of a mild winter could force governments to ration supplies, particularly to industrial users.
3. What does the EU do?
EU countries have filled gas storage to 82 percent of capacity, well ahead of a November target agreed this summer, giving some respite to supply fears ahead of the winter season.
The Commission is drawing up plans for an “emergency intervention” in the EU’s electricity market, with European ambassadors to receive a new policy assessment from the Commission before Friday’s ministerial meeting, a Commission spokesman confirmed on Tuesday.
Many national capitals have also taken matters into their own hands and announced support measures to protect users from crippling energy bills.
French President Emmanuel Macron said on Monday that France was prepared to supply more gas to Germany this winter in exchange for electricity imports from Berlin.
EU countries, including Germany, Italy and Spain, have introduced comprehensive energy saving plans that include temperature limits for businesses; some are planning windfall taxes on profits from energy producers that don’t use natural gas, then funneling the money to cushion consumers.
4. What are the options?
Although the Commission has not yet published any formal proposal, it has outlined several options.
In its preliminary assessment, obtained by POLITICO last week, the commission proposed efforts to reduce demand for electricity. It also suggested that countries cap the price of electricity from sources other than gas and redistribute funds from high-profit energy producers to help consumers.
The commission also floated several ideas for capping gas prices in another document seen by POLITICO — setting a maximum price for Russian gas or lowering prices through administrative action.
Spain and Portugal, which received special permission from the Commission in June to introduce a temporary price cap on gas, are seen as a possible trial run for similar bloc-wide measures. But analysts have raised doubts that the Iberian model, which involves subsidizing fossil fuel producers, can be applied elsewhere – particularly in countries where fossil fuels are a large part of the energy mix and subsidizing them can prove expensive .
5. Do the EU countries back the Commission’s plans?
Many EU countries now favor market intervention, including some form of energy price cap, but opinion remains divided on other proposals, such as setting a maximum price for Russian gas – an idea floated by Commission President Ursula von der Leyen on Friday.
The Kremlin warned it would cut off gas in response, sending alarm bells ringing in some countries.
Although Germany now gets very little gas from Russia, it is still concerned about a gas blockade that has a cascading effect around the bloc. “We remain skeptical when it comes to questions about a gas price cap,” said a spokesman for the German Economy Ministry.
But others appeared unfazed, with French President Emmanuel Macron saying on Monday that “if the Commission decided to implement a price cap on natural gas bought via pipelines from Russia, France would support such a measure.”
Warsaw is going one step further and will propose a cap on the price of all gas imports to Europe, a Polish diplomat told POLITICO.
There is also wariness about cutting gas and electricity prices, although opinions are beginning to shift. German Economy Minister Robert Habeck admitted the bloc needed “a fundamental reform of the electricity market.”
6. What happens then?
EU energy ministers go to Brussels on Friday, but it is not clear that the result will be an agreement.
The Czechs, who currently hold the rotating presidency of the Council, have drawn up a list of proposals, including price caps on gas from “specific jurisdictions” (read: Russia), temporary decoupling of gas and electricity prices, increased “liquidity in the market, “restriction of non-gas revenues using generators and assessing the impact of the EU Emissions Trading System.
Czech Industry Minister Jozef Síkela said ministers will consider two proposals: decoupling gas and electricity prices and setting a maximum price for non-gas generated energy such as nuclear and renewable energy.
But according to an EU diplomat, no legislation has yet been proposed and Friday’s summit will be more about discussing national views, with formal talks taking place at the next Energy Council in October. A senior Commission official suggested that a formal proposal would not come until after von der Leyen’s State of the European Union speech on 14 September.
EU leaders are also holding a summit in October, but with energy prices skyrocketing there is growing pressure for quick action.
“If we have our way, it will take weeks instead of months,” German Chancellor Olaf Scholz said on Monday.
Hans von der Burchard and Karl Mathiesen contributed reporting.
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