Oil & Gas

02 Sep 2022

EU Mulls Energy Price Cap for Certain Generators - Document

02 Sep 2022  by   

General view of a lignite mine near Greece's biggest power plants of Agios Dimitrios and Kardia September 29, 2011 in Ptolemais valley some 500 km north of Athens. REUTERS/Yannis Behrakis

The European Commission’s upcoming proposals to tackle surging energy prices should include a price cap for certain power generators that do not run on gas, according to a Commission document seen by Reuters.

The price limit would help raise revenue that governments could use to lower energy bills for consumers, and it should be rolled out alongside an EU-wide reduction in electricity demand, the document said.

The measure would apply to power generators like wind and solar farms, and nuclear power plants, which have lower running costs than gas plants, the document said.

In the EU’s current electricity market, generators sell their power at a price set by the last power plant needed to meet demand - often, a gas plant, which has meant the recent surge in gas prices has driven up the cost of electricity.

The jump in power prices has yielded bumper revenues for non-gas generators with cheap running costs, and the EU said countries should limit those revenues and instead spend the cash on measures to curb consumers’ rocketing energy bills.

National governments "would be obliged to share the resulting revenues with electricity consumers with a view to lowering their electricity bills,” the document said.

However, this scheme would not be compatible with existing policies in some countries to tax the windfall profits of certain energy companies, and those policies would have to be abolished, the document said. Italy has introduced a windfall profit tax.

The document described the ideas as an early assessment of options for EU initiatives to tackle energy prices, and not a formal policy proposal.

The EU proposals should also include measures to curb electricity demand, the document said.

EU countries have agreed to curb their gas use this winter, but while some governments have rolled out national measures to save electricity, EU countries have not yet joined up their efforts to do this.

The suggested changes could be implemented quickly to deliver an "immediate benefit" during the current energy crisis, the document said.

Russia has slashed gas deliveries to Europe, which has sent gas prices rocketing to record-high levels and left countries scrambling to buy non-Russian gas volumes and shield consumers from soaring bills.

EU countries' energy ministers will meet on Sept. 9 to discuss their response to the price surge.

A few days later, on Sept. 14, European Commission chief Ursula von der Leyen will outline the Commission's ideas for emergency EU measures to tackle the price spike, a senior commission official said on Thursday.


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