Brussels wants to encourage fixed price electricity purchase contracts and contracts with a price guaranteed by the State. JeanLuc / stock.adobe.com
The European Commission encourages the use of long-term energy contracts to protect consumers from price spikes.
From our correspondent in Brussels
If there is one reform that European households and businesses are eagerly awaiting, it is that of the electricity market. Brussels put its proposals on the table on Tuesday. We are a long way from the revolution for which Ursula von der Leyen initially pleaded, when she promised last September a ” comprehensive and in-depth reform” of the European electricity market. A position then shared by Madrid and Paris.
The proposed adjustments could nevertheless contribute to price stability. Brussels did not want to touch the order of merit, this key mechanism of the wholesale electricity market according to which the price is aligned with the production costs of the last – and most expensive – units called to respond to peaks of demand, namely coal and gas-fired power plants. Attacking the “merit order” meant taking the risk of seizing up the wholesale market and therefore creating blackouts. Northern European countries and Germany didn’t want to hear about it. “We preserve market fundamentals “Admitted on Tuesday the Commissioner for Energy, Kadri Simson. However, Brussels intends to protect consumers and businesses from volatility, in particular by giving them more visibility in the medium and long term.
For households, the Commission is proposing to impose fixed price contracts on all energy suppliers with more than 20,000 private customers, whereas these contracts are not compulsory in the EU and no longer apply in a number of States, notably in Belgium. These fixed-rate contracts would be for a minimum of one year. Consumers would also have the option of taking out – or keeping – variable price contracts. In particular to recharge the battery of their electric car or operate their heat pump at night.
Read alsoPurchasing power: the effect of price shields on gas and electricity has been massive
Drawing lessons from last year’s bankruptcies, Member States will also be asked to designate suppliers of last resort so that no consumer is left without electricity if their supplier goes out of business. Finally, in the event of runaway prices and if Brussels does indeed give the green light, EU governments would be authorized to reduce consumers’ bills.
The reform plans, at the same time, to reduce the bill for companies, in particular SMEs, by allowing them to conclude electricity purchase contracts, providing for a very long-term price. Over 5, 10 or 15 years. “It’s aboutsummarizes an energy market specialist,to distance the fluctuations of fossil fuels. Currently, only very large companies have access to this type of contract, suppliers being more reluctant to tie up with smaller companies whose long-term viability they do not necessarily measure. To overcome this difficulty, Member States would be required to put in place instruments – guarantee scheme or public support for the contract to purchase non-fossil fuels. Objective: to cover the risk of default by the buyer.
Nuclear preserved
To lower bills in the medium and long term while reducing CO emissions2, Brussels intends above all to strengthen investment in renewable or low-carbon energies – including nuclear. The Commission thus proposes to develop energy communities. Thus, an individual who has installed solar panels would now have the possibility of reselling the energy produced to his neighbours, his family or other consumers, and not to his supplier. Not enough to revolutionize the market, but this measure could still encourage households to invest in this type of equipment.
Read alsoNuclear: the Nupes is divided, the RN is opposed … The deputies to follow during the examination of the text in the Assembly
It is above all a question of developing contracts for difference (CFDs, in English). Concluded with a public entity, this contract would allow the energy supplier who has made an investment to secure it thanks to guaranteed income over the long term regardless of the evolution of the market price. These contracts, which already exist, provide for floors and ceilings. If the price of electricity is lower than the floor price, the difference is compensated for the supplier. When the market price is above the ceiling, the overpayment would then be redistributed to all consumers. France has obtained that these CFDs also cover the investments necessary for the extension of nuclear power plants. “Nuclear power is included in this reform, which was essential for France “, welcomed the Minister of the Economy, Bruno Le Maire, who wants to see it implemented by the end of the year. The ball is now in the court of the European Council and Parliament.