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No gas price cap in EC’s draft power proposals – leak


13 Sept 2022 12:20

Foto: Pixabay

Foto: Pixabay


13 Sept 2022 12:20

(Montel) There were no gas price caps in draft unofficial European Commission proposals for emergency measures to address soaring power prices seen by Montel on Tuesday.

The EC had last week recommended a temporary price cap on Russian pipeline imports after reduced flows since the start of the war in Ukraine had helped to send European gas prices skywards.

But the measure is controversial, with EU countries more dependent on Russian gas such as Austria and Hungary against it.

The EC draft proposals included a cap on market revenues for low-cost power generators, coordinated EU power demand cuts, options to regulate retail prices below cost and a profit-based contribution from fossil fuel companies to help governments support end-users.

These would be temporary measures focused on mitigating excessively high energy prices this winter.

The EC is expected to present formal proposals on Wednesday, after its president Ursula von der Leyen outlines them in a speech to the European Parliament.

The unofficial draft did not include specific figures on the level of the market revenue cap, but an earlier draft suggested EUR 200/MWh.

The market revenue cap would apply to power generated from renewables, nuclear, lignite and oil-fired power, with an exception for bio-methane. It would cover both power exchange and over-the-counter trading, power purchase agreements (PPAs) and other hedging against power price fluctuations, said the draft.

However, it would only apply to actual realised market revenues, so producers who had already hedged or sold power under PPAs for prices below the cap would not be affected.

The draft also specifically urged national governments to promote renewable PPAs, including by using compatible support schemes and guarantees of origin.

Governments could use both the revenues above the cap in the power markets plus the proposed “solidarity” contribution from fossil fuel companies’ surplus profits in their 2022 fiscal year to fund support for households and companies facing record high energy prices.

This could include setting regulated prices below cost and subsidising the utilities affected by them, as well as extending regulated prices to small and medium enterprises.

Demand cuts
National governments would have to cut their demand for selected peak hours by a yet-to-be decided amount, with earlier drafts suggesting at least 5% on average compared to that forecast by the transmission system operators.

The peak hours would normally be when power prices were highest, but could also be when renewables output was expected to be low and marginal gas-fired plants would be needed to meet demand.

This approach could cut gas demand by around 1.2bcm or nearly 4% this winter, said the draft.

National governments would also have a voluntary goal to cut their total monthly power demand compared to the average over the previous five years. An earlier draft suggested this goal should be at least 10%.

The proposals are set to be based on emergency provisions that only require a qualified majority approval from the ministers acting in the EU Council, which can happen very quickly.

The Czech EU presidency has said it hopes to have an accord between the ministers and the EC on such urgent measures by the end of September.

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