The European Commission on Wednesday listed five measures that will be up for discussion at a meeting of energy ministers. Capping Russian gas prices and mandating reductions in electricity use at peak hours are on the list of measures. Energy costs are soaring for households and businesses in the wake of Russia’s war against Ukraine. Loading Something is loading.
Capping prices on Russian natural gas and seeking ways to reduce liquidity crunches at energy companies are among the five measures European energy ministers will discuss Friday as they seek to calm the region’s energy crisis.
The Czech Republic, which is currently holding the EU presidency role, last month called for the emergency meeting. Russia has been squeezing gas flows into Europe in response to Western sanctions imposed upon it for its invasion of Ukraine.
“We are facing an extraordinary situation, not only because Russia is an unreliable supplier, as we have witnessed over the last days, weeks, months, but also because Russia is actively manipulating the gas market,” European Commission President Ursula von der Leyen said at a press conference ahead of Friday’s meeting in Brussels.
Gas price cap
Proposing a price cap on Russian gas to lower costs is on the list of measures to be discussed. The European Commission’s energy agency has already urged EU members to bring in emergency wholesale price-cap measures to help households and businesses pay their soaring energy bills.
A cap would limit what local buyers can pay wholesale for Russian gas imports. With Russia cutting energy supplies to the region, benchmark Dutch TTF futures during the year have jumped about 1,000% from a year ago.
“We must cut Russia’s revenues, which Putin uses to finance his atrocious war in Ukraine,” von der Leyden said as part of prepared remarks she delivered Wednesday, referencing Russian President Vladimir Putin. He said Wednesday Europe’s aim to impose gas price caps is “stupid” and such a move would lead to higher prices.
Emergency liquidity
Energy ministers will also discuss liquidity crunches facing energy utility companies that are navigating volatile markets. “These companies are currently being requested to provide unexpected large amounts of funds now, which threatens their capacity not only to trade, but also the stability of the futures markets,” von der Leyden said. She said officials will update its temporary framework for state guarantees to be delivered “rapidly.”
An executive at Norwegian energy company Equinor ASA told Bloomberg that Europe’s energy crisis could get even worse unless governments provide liquidity to cover margin calls of at least $1.5 trillion.
Electricity revenue caps, windfall profit ‘contribution’
Proposing a cap on revenues of companies producing electricity at low costs and a “solidarity contribution” for fossil fuel companies as they’ve made “massive” profits are also on the commission’s list.
Demand reduction
“Smart savings” of electricity was the first measure set out on the commission’s list. With natural gas a key source of power generation, electricity prices have surged. Peak demands for electricity usher pricey gas into the market, von der Leyden said.
“So what we have to do is to flatten the curve and avoid the peak demands. We will propose a mandatory target for reducing electricity use at peak hours,” she said.
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