The EU proposes more flexibility to comply with the electricity saving plan and tax energy companies

European governments caress the agreement on the plan to save electricity and the tax on energy companies proposed by Brussels to deal with rising prices.

Thomas Osborne
Thomas Osborne
27 September 2022 Tuesday 13:30
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The EU proposes more flexibility to comply with the electricity saving plan and tax energy companies

European governments caress the agreement on the plan to save electricity and the tax on energy companies proposed by Brussels to deal with rising prices. The Czech Presidency of the Council has today circulated a draft among the Twenty-seven that proposes different adjustments to the original proposals to ensure that the countries have enough flexibility to achieve their objectives. The document will be debated tomorrow, Wednesday, by the European ambassadors and it is expected that it will be practically the final text, diplomatic sources explain.

This would allow the green light to be given to the plan in the extraordinary council of European energy ministers convened for this Friday in Brussels. The changes affect, on the one hand, the formula for defining peak hours of consumption and the way of calculating savings (the global objective would be to reduce 10% of total electricity consumption in the EU) and, on the other, the limit of the extraordinary profits that energy companies are obtaining as a result of the high price of gas, which determines the price of electricity even though it is generated from cheaper sources.

The latest draft provides, for example, that countries that wish to can start applying this measure in 2023 and not during this fiscal year, as the European Commission had proposed. The final structure of this tax will depend on the tax on electricity companies in which the Spanish Government works. In this sense, the compromise proposal presented by the Czech presidency of the EU offers "guarantees of compatibility" with national legislation that meet the same objective that was not in the original proposals, explain diplomatic sources.

The importance of the agreements that the European energy ministers are expected to reach this Friday, however, is not enough to placate the growing unease in an important group of countries, including France, Italy, Spain and Poland, with the indecision of the European Commission regarding the request made by the energy council at the beginning of the month to present different formulas to cap the price of gas.

"The energy crisis that began last autumn has only gotten worse over time and is causing unbearable inflationary tensions that are hitting our homes and businesses very hard," says the letter to Energy Commissioner Kadri Simson, promoted by Belgium. and signed by a dozen countries, including Spain, Italy and Poland. The letter calls on the Commission to present a proposal at Friday's meeting to set a cap on the price of all gas purchased by the EU "from all jurisdictions", not just Russia.

The signatories do not hide their impatience with the Commission's delay in acting in this area: "The price cap demanded by a growing group of countries since the beginning of the crisis is the only measure that will help all countries to mitigate tensions inflationary policies, manage expectations, provide a framework in case of supply problems and limit windfall profits in the sector. The letter calls on Brussels to present a legislative proposal "as soon as possible" after Friday's meeting.

France, on the other hand, has written a "contribution" to the discussions on Friday in which it insists on the objective of decoupling the price of electricity from that of gas and makes an ardent defense of the "Iberian mechanism" negotiated by Spain and Portugal. "This instrument, applied on a European scale, can be put into operation quickly as an emergency solution to lower wholesale electricity prices for a limited period of time," says Paris, which also supports the idea of ​​setting a "unilateral ceiling" to the price of gas and, in a second phase, to negotiate amicably with Norway and Algeria "reasonable" prices by mutual agreement.

The French government proposes some adjustments to the 'Iberian mechanism' to ensure that it does not cause an increase in gas consumption or CO2 emissions but insists on its benefits at European level. "Its effects are proven," he says, citing that while in France and Germany the megawatt hour of electricity was paid at 620 and 540 euros respectively on September 15, in Spain the price was 199 euros. "Electricity prices threaten to lead the EU into recession (...), European action must urgently focus on the objective of returning to affordable electricity prices in wholesale markets," Paris claims.

Although there is still a group of countries that are very reluctant to the initiative to cap the price of gas and another that is undecided, the pressure for Brussels to act is increasing at times. There is still one more letter circulating, the one sent by the Greek Government to the European Commission proposing a 10% rate on all energy generated from gas. Friday's council will allow us to see where each delegation stands in the dilemma about the cap on the price of gas and how to prevent it from contaminating the price of electricity, but the debate will go to the table of the extraordinary European Council that will meet in Prague on October 7 the leaders of the Twenty-Seven.