European proposal to decouple electricity prices from gas prices.

European proposal to decouple electricity prices from gas prices.

European proposal to decouple electricity prices from gas prices.

Here are the options considered by the European Commission and sent by official mail to the various states.

What is written and proposed is very important for the future of European energy policy as well as for the future of inflation. Indeed, these measures, although non-monetary, could significantly reduce inflation in the euro area.

I’ll spare you the introductory babble about the causes of the current energy mess.

At the big commission, we are beginning to realize that the European citizen will not be able to pay 10 or 15,000 euros a year for the heating bill without this leading to a riot that will make the waistcoat movement look like a cat’s pee. Not everyone is a yellow vest. Everyone gets hot and needs energy.

Options considered

A) Decoupling / limitation of the impact of the gas price on the price of electricity

– Temporarily limit the price of gas used for the production of electricity;

– Temporarily limit the price of gas imported from some jurisdictions;

– temporarily exclude the production of electricity from gas from the order of merit and from the determination of prices on the electricity market.

B) Increase the liquidity of the market

– Immediate support through credit lines to market participants facing very high margin calls, including the case of a specific solution at European level, for example through the role of the ECB;

– Modification of trade rules on energy exchanges, for example by temporarily modifying the regulatory requirements for guarantees in electricity exchanges. regulatory requirements for guarantees in electricity exchanges, including the review of automatic price cap adjustments. Automatic adjustment of the price limit;

– Temporarily suspend the electricity derivatives markets in Europe; or subject futures trading to specific intervals.

C) Coordinated measures to reduce the demand for electricity

– Demand reduction measures in the electricity sector, for example similar to coordinated demand reduction measures in the gas sector adopted in July 2022. Demand reduction measures in the gas sector, such as those adopted in July 2022.

D) Limitation of revenues of inframarginal electricity producers

– Temporarily limit the price of electricity earned by inframarginal producers.

E) Impact of the EU Emissions Trading System

– Evaluate the possibilities of using the EU Emissions Trading System to cope with the current high electricity prices and ensure that the Council takes the necessary measures swiftly. Ensure that the Council moves swiftly towards an agreement on the recovery chapters of REPowerEU (Recovery and Resilience Plans (RRF), including the possibility to use the shares of the Market Stability Fund.

– the security of electricity and gas supply at European level must be preserved;

– the internal energy market and the resulting benefits must be preserved;

– the measures should not lead to an increase in gas consumption, nor undermine efforts to reduce gas consumption in Europe

– the measures should be simple to implement and coordinated at EU level;

– the measures should mitigate the impact on consumers’ energy bills;

– consistency with the objectives and implementation of the European green contract. The above options for emergency measures are designed as an immediate response to the current extraordinary situation. However, we should continue to discuss a systemic update of the design of the internal energy market, so that it is easier to manage and better prepared for similar market conditions in the future.

This upgrade must be properly studied, based on an in-depth analysis and impact assessment and take into account the progressive implementation of a future decarbonised energy market.

Problems: 1. Do you agree that the Commission needs to propose measures at EU level to be taken in time for the next heating season? If so, which of the described or alternative options should be pursued?

2. What kind of specific tools would you consider appropriate to achieve rapid resolution of the above problems?

Carlo SANNAT

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