It is a radical intervention in the electricity market, but agreement was reached in just two and a half weeks: at a meeting in Brussels on Friday, the energy ministers approved the EU law that forces member states to skim off profits from cheap power plants. The proceeds are to flow into aid programs for citizens and companies that are struggling with energy prices. The Commission only presented the draft of the legal act in mid-September.
The deal has yet to be confirmed by the capitals, but that’s a formality. Economy Minister Robert Habeck (Greens) said after the meeting, the federal government would “quickly implement” the measures. Berlin had planned something like this anyway; the EU regulation now provides the framework for this. The rapid adoption was also made possible by the fact that the 27 governments had made the law more flexible in their negotiations. In principle, the ordinance stipulates a price cap of 180 euros per megawatt hour for green coal, lignite and nuclear power suppliers. The exchange price for electricity is significantly higher – the difference should go to the states. The reason for the high prices are the exorbitant costs of the gas-fired power plants, which de facto determine the exchange price for electricity. The obligation to skim should initially apply until June.
However, the federal government in particular pushed during the negotiations to be allowed to set other upper limits. The wish was fulfilled: The final text of the law allows to introduce lower limits; these may differ depending on the energy source. Habeck said that “180 euros are a bit too high” for very cheap green electricity power plants. Conversely, the Member States may grant more generous price caps to systems that do not get by with 180 euros. Another adjustment to the original proposal is that governments can choose to siphon off just 90 percent of the excess profit.
The ordinance also requires governments to identify the 10 percent peak hours between December and March and reduce consumption by at least 5 percent during those peak periods. However, the final text now gives Member States the possibility to define the peak period more flexibly. Instead of 10 percent, governments can only choose 3 percent of the hours.
The act also establishes a one-time special tax for oil, gas and coal companies. Governments should compare their annual profits with the average of the four previous years. Profit increases of more than 20 percent should be subject to a special tax of at least 33 percent. The Commission promises that all of these measures could generate up to 140 billion euros over a year.
Habeck is against a gas price cap
Ministers also discussed how gas prices could be reduced. In a letter to Energy Commissioner Kadri Simson, 15 member states called for the introduction of a price cap – at least on imports, perhaps even on all gas transactions in the EU. The federal government is one of the opponents and points out that suppliers of liquefied natural gas like the USA could simply send their tankers somewhere else. Habeck explained that a fixed cap can only be justified “if one says what will happen if not enough gas comes to Europe”. The only answer he always hears is that such a deficiency has to be distributed among the member states, but “I don’t think that’s politically sustainable”. However, he was “quite confident that we will find a better solution,” said the minister.
Commissioner Simson proposed alternatives, including “a temporary EU-wide measure to cap the price of gas” that power plants pay, the Estonian explained. This would lower the electricity price, but governments would have to subsidize the gas purchases of the power plants. The commissioner warned that the price limit must be high enough so that the gas consumption of the power plants does not increase. This announcement is not without reason: Spain and Portugal have implemented such a model – and the consumption of the scarce raw material has grown.
Simson said she would work out the concepts before the EU summit in Prague at the end of next week. Concrete draft laws could follow “quickly” afterwards. So the debate goes on – first among the heads of state and government at their summit meeting.