The EC will propose a Price Ceiling for Russian Gas in the EU

Business » ENERGY | September 9, 2022, Friday // 08:28
Bulgaria: The EC will propose a Price Ceiling for Russian Gas in the EU @Flickr

At the extraordinary meeting of energy ministers in Brussels today, the European Commission (EC) will propose five urgent measures to deal with the energy crisis in the community, including the introduction of a ceiling on Russian gas prices.

According to the newspaper Politico, the EC wants to set a ceiling on the price of Russian piped gas in the EU at 50 euros per MWh, or about 520 euros per thousand cubic meters of gas.

The European Commission proposes that all EU countries reduce electricity consumption by 10% of the average monthly value for the past five years and by another 5% during peak hours, reports Reuters. During peak hours, European thermal power plants burn most of their gas, while at other times they use other generation capacity. In addition, the EC proposes to introduce electricity price caps of EUR 200/MWh for producers using other energy sources than gas, such as nuclear power plants, hydroelectric plants and alternative energy sources.

At a press conference in Brussels on September 7, EC chief Ursula von der Leyen laid out the EC's proposals but did not confirm any of the figures quoted in the media, including the quantitative figures for capping the price of Russian gas.

The head of the EC blamed Russia, which he said was "manipulating the energy markets", for Europe facing "astronomical prices" for electricity.

To counter the crisis, the European Commission proposes a plan of five main steps, the first of which is to reduce energy consumption during peak hours. Von der Leyen emphasized that the EU currently uses significant amounts of extremely expensive gas to generate electricity.

The second step is to "restrict the revenue of low-priced power generation companies." "Low-carbon energy sources, i.e. nuclear and hydro and alternative generation, offer windfall profits. <...> We will propose that these windfalls be redirected to support vulnerable people and companies," she said.

The third step is to create a tax on oil and gas companies that is lower than that on low-carbon companies. "Oil and gas companies have also made huge profits. So we will offer a solidarity contribution to fossil fuel companies," she added.

The fourth step is "support for the liquidity of energy companies". "They need to be supported to deal with volatile markets," she said.

The fifth, most discussed step is limiting gas prices from Russia. "We will propose to introduce a ceiling on Russian gas prices. We must reduce Russia's income <...>", she stressed. - We are ready for it. At the beginning of hostilities [in Ukraine], Russian pipeline gas accounted for 40% of all gas imports [in EU countries]. Today it represents only 9% of gas imports".

The head of the EC emphasized that the introduction of a ceiling on the prices of Russian gas in the EU can be done "very quickly, once the measure is approved by the community". "13 EU countries are already cut off from Russian gas," she said. - Of course, we are also exploring the possibility of limiting the price of liquefied natural gas, but currently energy is in short supply, and liquefied natural gas can easily be diverted by gas carriers to other parts of the world."

The introduction of a ceiling on the price of liquefied natural gas is not particularly supported by France. A source from the country's energy ministry explained to Reuters that if the EU takes such a measure, LNG tankers will be diverted to other regions.

According to the head of the EC, the EU's gas storages are currently 82% full, and the EU has set itself the goal of being 80% full by November 1.

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