France and Spain have joined forces to demand sweeping changes to the EU’s energy market rules in the face of “unbearable” electricity price increases that are hitting consumers and driving up inflation.
Paris and Madrid’s calls for reform come after a surge in gas prices that has raised fears of an EU winter energy crisis.
“The EU energy market is not fit for what we want to achieve,” said Bruno Le Maire, France’s economy minister ahead of a meeting of eurozone finance ministers in Luxembourg on Monday. “It is time to have a look at the European energy market. It has one major downside, which is the alignment of electricity prices with the price of gas.”
Le Maire said the crisis was “unfair, inefficient and costly” for citizens and businesses. He said he and his Spanish counterpart, Nadia Calviño, would ask the European Commission for better regulation of the bloc’s natural gas stocks and reform of EU rules to reduce price volatility.
The EU’s common energy market was set up in the 1990s to help liberalise market access for electricity providers and ensure some harmony in prices. Governments retain full control of their national energy mixes.
Spain has since July been calling for a change to the EU’s marginal pricing system — under which rates are set by the highest prices national grids are willing to pay. Last month it demanded a common EU approach, including natural gas purchases to counteract vendors’ market power and the building of strategic reserves.
“European challenges require a European response,” Calviño, the number two in Spain’s government, said in an FT interview ahead of the meeting. She argued that a strategic gas reserve would be “learning the lesson from the response to the pandemic and the centralised buying of vaccines”.
Speaking after the Eurogroup ministerial meeting, EU economics commissioner Paolo Gentiloni said Brussels would present a package of energy policies in December that will explore the bloc’s role in the common procurement of natural gas and options for greater storage.
Gentiloni added that national policy responses should be “temporary and targeted to respect the single market and state-aid rules”.
Spain’s Calviño pushed back against electricity companies’ challenge to Madrid’s €3bn levy on their “windfall profits” — one of the leftwing government’s main reactions to the crisis. Madrid says the funds will be used to reduce the prices faced by consumers — at present pushed up by high gas and carbon costs — but the utilities say the move could deter green investment and violate EU law.
“It is essential that this increase in wholesale prices is not fully passed on to customers and companies and therefore we must use all possible legal instruments to reduce the elements of the energy bill,” Calviño said. She added that the Spanish levy, most of which has already become law, was “absolutely and fully compliant with EU legislation”.
In Spain, where electricity tariffs paid by more than a third of households are linked to high spot market prices, the energy crisis has dominated the political agenda for months.
But the price rises have added to the sense of urgency elsewhere in the EU, with some leaders calling for the bloc to reconsider decarbonisation plans that could further increase the pressure on households.
Brussels is resisting demands to amend its electricity pricing rules, with officials maintaining that much of the price surge will dissipate early in 2022. The commission will, however, publish a paper shortly laying out what options governments have to tackle the crisis.
Officials told the FT that the commission was assessing whether government measures in response to the price rises were in line with EU electricity market and state-aid rules.
One EU competition expert said Spain’s raid on windfall profits would be assessed to see if it unfairly targeted some companies and sectors over others, thus falling foul of the bloc’s state-aid rules.
In a further sign of concern about the issue, José Manuel Albares, Spain’s foreign minister, travelled last week to Algeria, traditionally the country’s biggest gas provider, to obtain assurances that it would keep Spain supplied at market prices, despite the planned closure of a pipeline that runs via Morocco.
Twice weekly newsletter
Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.
Credit: Source link