EU Commission counts on long-term power contracts to stabilise prices

Brussels — The European Commission proposed on Tuesday different measures aimed at trading more electricity through long-term contracts to protect businesses and households from price spikes.

The reform proposals answer calls from capitals to reduce the impact of gas on electricity prices, after power bills soared in the European Union following Russia’s supply cut.

"Tight global supply and Russia’s manipulation of our energy markets has left many consumers facing massive increases in their energy bills," EU Energy Commissioner Kadri Simson said.

To tackle price volatilities, the commission wants to promote long-term electricity contracts which provide power at a stable price to customers and boost investments in generation capacities.

EU countries are to guarantee a minimum power price to generators for all new investments requiring subsidies, while revenues above a set threshold are to be funnelled back to consumers, a press release said.

These incentives are to apply to all non-fossil-fuel power generation, including nuclear power plants.

Long-term contracts signed between power producers and customers are to be backed up by public guarantees to make them more viable.

The commission also aims to strengthen the rights of end users, entitling them to the free choice of supplier, both fixed-price and dynamic contracts, and the possibility to have more than one supply contract.

The proposals further include measures to manage varying demand, as demand peaks on the short-term market drive prices up.

At low demand, plants generating electricity from cheaper sources - like renewables or nuclear - deliver power to the grid. The higher the demand, the more expensive power sources - like gas - are added to the mix, leading to volatile prices through a trading day.

The commission hopes that the proposal will incentivize new investments in power generation capacity from renewable sources to remove gas and coal from the electricity mix.

"Renewables are our ticket to energy sovereignty and ending our dependence on fossil fuels," EU Commission Vice-President Frans Timmermans said.

More renewables are to lead to lower costs for consumers, Timmermans added.

Reacting to the plans, EU lawmaker Michael Bloss called the proposal "a gift to the nuclear industry."

The politician from Germany's Green Party criticized the potential subsidies for nuclear power plants, saying they are "not compatible with a future, flexible electricity system."

Markus Ferber, a German conservative EU lawmaker, welcomed the draft bill for its targeted approach.

The reform plans for the bloc's electricity market are likely to trigger mixed reactions from the EU's 27 member countries.

Germany, the Netherlands and five other countries have called for caution, arguing any changes should not discourage investments in the renewable power sector.

France and Spain have been in favour of a more wide-ranging reform.

The capitals and the European Parliament are to negotiate the final text before it can enter into force.

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